61ST  CONGRESS  \  c^xrATT?  /DOCUMENT 

2d  Session       }  SENATE  *      No.  593 


NATIONAL  MONETARY  COMMISSION 

The  German  Great  Banks  and 
Their  Concentration 

in  connection  with 

The  Economic  Development  of 
Germany 

By 

DR.  J.  RIESSER 

Geheimer  Justizrat  and  Professor  at  the  University  of  Berlin 


Third  edition  completely  revised  and  enlarged 


Washington  :  Government  Printing  Office  :  1911 


NATIONAL  MONETARY  COMMISSION. 


NELSON  W.  ALDRICH,  Rhode  Island,  Chairman. 

EDWARD  B.  VREELAND,  New  York,  V ice-Chairman. 

JULIUS  C.  BURROWS,  Michigan.  JOHN  W.  WEEKS,  Massachusetts. 

EUGENE  HALE,  Maine.  ROBERT  W.  BONYNGE,  Colorado. 

PHILANDER  C.  KNOX,  Pennsylvania.  SYLVESTER  C.  SMITH,  California. 

THEODORE  E.  BURTON,  Ohio.  LEMUEL  P.  PADGETT,  Tennessee. 

HENRY  M.  TELLER,  Colorado.  GEORGE  F.  BURGESS,  Texas. 

HERNANDO  D.  MONEY,  Mississippi.  ARSENE  P.  Pujo,  Louisiana. 

JOSEPH  W.  BAILEY,  Texas.  ARTHUR  B.  SHELTON,  Secretary. 

A.  PIATT  ANDREW,  Special  Assistant  to  Commission. 


TABLE  OF  CONTENTS. 


Page. 
JFACE XI 

PART   I. 

[INTRODUCTION. — The  tasks  of  banks  in  the  economic  life  of  the  na- 
tion   i 

1 .  General  considerations. ..<>, i 

2.  Special  considerations 8 

(a)  The  tasks  of  banks  during  normal  times 8 

(b)  The  tasks  of  banks  during  critical  times 15 

(c)  The  tasks  of  banks  in  time  of  war  and  in  preparing  for 

war  (financial  readiness  for  war  and  financial  conduct 
of  war) 21 

PART  II. 

THE  FIRST  PERIOD  (FROM  THE  MIDDLE  OF  THE  NINETEENTH  CENTURY 
TO  THE  YEAR  1870). 

CHAPTER    I. — Sketch  of  economic  conditions  in  Germany  at  the  time 
of  the  establishment  of  the  oldest  existing  credit 

banks 27 

CHAPTER  II. — The  German  banks  during  the  first  period  (1848-1870) .         44 
Influence  of  the  Credit  Mobilier,  its  merits  and 

defects 49 

Differences  between  the  Credit  Mobilier  form  of 
organization  and  that  of  the  German  banks, 
founded  during  the  first  period,  especially  the 
Darmstadter  Bank  and  the  Disconto-Gesell- 

schaft 56 

The  A.  Schaaffhausen'scher  Bankverein 71 

The  Berliner  Handelsgesellschaft 75 

The  Mitteldeutsche  Kreditbank 77 

Concluding  remarks 83 

PART  III. 
THE  SECOND  PERIOD  (FROM  1870  TO  THE  PRESENT  DAY). 

CHAPTER  I. — (i)  Table  of  events  during  the  second  period  which 
influenced  the  development  of  German  bank- 
ing   85 

in 

231868 


National    Monetary     Commission 

CHAPTER      I. — (2)  Sketch  of  the  economic  development  of  Germany  Page. 

from  1870  until  the  present 87 

Preface 87 

Growth  of  population 88 

Growth  of  national  wealth 91 

Progress  of  national  income 92 

Investment  of  national  wealth 93 

Changes  in  the  distribution  of  incomes. .  96 

Small  and  large  scale  industry 102 

Population  engaged  in  industry,   com- 
merce, and  agriculture 103 

Progress  of  agriculture 105 

Necessary  imports,  unfavorable  balance 

of  trade no 

Strengthening  of  the  domestic  market. .  113 

The  founding  of  stock  companies 115 

Production,  consumption,  imports,  and 

exports  of  pig  iron 120 

Production  of  coal 122 

Electro-technical  industry 123 

Chemical  industry 125 

Textile  industry 128 

Domestic  industry 129 

Development  of  facilities  of  communi- 
cation   130 

Railroads 130 

Postal  facilities 131 

Telegraph 132 

Telephone 132 

Merchant  marine 133 

Subsidies  to  navigation 134 

The    Hamburg  -  American    Packet 

Steamship  Company 135 

The  North-German  Lloyd 136 

Agreements  with  the  International 

Mercantile  Marine  Company 136 

Shipbuilding 140 

Navigation  on  the  internal  water- 
ways    141 

Currency:  The  Reichsbank 141 

Cartels,     Definition,     development     in 

Germany.     Official  inquiry 167 

Steel  Works'  Union  (Stahlwerksver- 

band) 174 


IV 


Table      of     Contents 


CHAPTER  I. — (2)  Sketch  of  the  economic  development  of  Germany    Page, 
from  1870  until  the  present — Continued. 
Preface — Continued . 

Cartels,      Definition,      development      in 
Germany.     Official  inquiry — Cont'd. 
Struggle  between  the  "mixed"  and 

"  pure  "  works 175 

International    agreements    regarding 
the  exportation  of  rails  and  girders . 

Concluding  remarks 

[AFTER  II. — The  (German   great  banks  during  the  second  period 

(1870  to  the  present) 

Section  i.  Introduction 

Section  2.  The  current  (regular)  banking  business 

I.  Debit  operations  of  the  credit  banks  (taking  of  credit) 

A.  The  deposit  business 

1 .  General  observations 

2 .  Deposits  in  foreign  countries 

3 .  Deposits  at  individual  Berlin  great  banks . . 

4.  Deposits  at  all  German  credit  banks  and  at 

the  Berlin  banks 

B.  Other  debit  operations  of  the  credit  banks 

The  cheque  system  and  its  present  use  by  Ger- 
man banks 

II.  Credit  operations  of  the  German  credit  banks.     (Lending  of 

credit) 

A.  Introduction 

1.  Observations  on   the   granting  of  general 

bank  credit 

2.  Observations  on  the  granting  of  industrial 

credit  in  particular 

Objections  to  the  methods  used  by  the 
banks  heretofore  in  lending  credit. . . 
The  proposal  of  Felix  Hecht  regarding 
the  organization   of  a  central  institu- 
tion for  long-term  industrial  credit . .  . 
The  current-account  business.  . .' 

C.  The  acceptance  business 275 

D.  The  discount  business 289* 

E.  The   "lombard"   (collateral   loan)   and   "report" 

(carry-over)  business 307 

F.  The  brokerage  business 323 

G.  The  transformation,  founding,  issuing,  syndicate 

and  security  business 336 

i  c  The  transformation  and  founding  business . .       336 


182 

183 

1 86 
186 
191 
191 
191 
191 
202 
204 

208 

211 

2IS 

219 

219 
219 

229 
232 


B. 


240 
259  / 


National    Monetary     Commission 

CHAPTER  II.— The  German  great  banks  during  the  second  period    Page. 

(1870  to  the  present)— Continued. 

Section  2.— The  current  (regular)  banking  business— Continued. 
II.  Credit  operations  of  the  German  credit  banks.     (Lending 
of  credit) — Continued. 

G.  The  transformation,  founding,  issuing,  syndicate, 
and  security  business — Continued. 
2.  The  issuing,  syndicate,  and  security  busi- 
ness         347 

(a)  The  issuing  business  in  general 347 

(a)  Methods  used  in  the  issuing 
business  proper  and  its 

preliminary  stages 348 

(^9)  The  extent  of  the  German 

issue  business 358 

(6)  The  issuing  of  industrial  securities. .       364 

(c)  The  floating  of  German  State  and 

Communal  loans 377 

(d)  The  floating  of  foreign  securities 384 

(a)  Principles  underlying  the 
flotation  of  foreign  secu- 
rities (see  section  7) 384 

(/?)  Amount  of  foreign  securi- 
ties issued  in  Germany .  .  392 

(e)  Amounts  of  listed  securites  issued  by 

each  of  the  (6)  Berlin  great  banks 

(see  Appendices  V  and  VI) 395 

(/")  The  syndicate  business 396 

(g)  The  security  business 402 

The    importance    of   a   strong 

bourse 406 

Sections.  Bank  groups  and  syndicates 407 

(Section  ^VPhe  over-sea  and  foreign  business  of  the  German 

^•— -^ —,-*'       credit  business 420 

\T*j  Part  taken  by  the  banks  in  developing  German  over-sea 

import  and  export  trade 420 

The  opening  of  branches  in  Hamburg,  Bremen,  and  Lon- 
don, and  the  organization  of  over-sea  and  foreign  banks, 
and  of  domestic  subsidiary  banks  for  over-sea  and  foreign 
business 432 

1.  Participations  of  the  Deutsche  Bank 432 

2 .  Participations  of  the  Disconto-Gesellschaf  t 440 

3.  Participations  of  the  Dresdner  Bank 445 

4.  Participations  of  the  Darmstadter  Bank 447 

5.  Participations  of  the  Berliner  Handelsgesellschaf  t .       450 

6.  Participations  of  the  A.  Schaaffhausen'scher  Bank- 

verein 452 

7.  Participations  of  the  Nationalbank  fur  Deutsch- 

land 453 

VI 


Table      of     Contents 


CHAPTER  II. — The  German  great  banks  during  the  second  period    Page. 

(1870  to  the  present) — Continued. 
Section  4.  The  over-sea  and  foreign  business  of  the   German 

credit  business — Continued. 
III.  The  common  subsidiary  companies  of  the  German  credit 

banks  for  the  promotion  of  over-sea  and  foreign  business.       455 
Section  5.  General  financial  results  of  the  German  credit  banks: 
Gross  earnings  and  their  composition;  general  ex- 
penses; net  profits;  dividends;  writing  off;  reserves.       460 
Section  6.  Character  of  the  business  management  and  business 

development  of  each  of  the  Great  Berlin  Banks 472 

1.  The  Deutsche  Bank 472 

2.  The  Disconto-Gesellschaft 482 

3.  The  Dresdner  Bank 492 

4.  The  Darmstadter  Bank 498 

5.  The  A.  Schaaffhausen 'scher  Bankverein 507 

^rr~ ^  6.  The  Berliner  Handelsgesellschaft 517 

^Section  7.  .The  so-called  export  capitalism.     The  investment  of 

\t_  ^cr-^'       German  capital  in  foreign  industrial  and  commercial 

enterprises  and  securities.     The  establishment  of 

subsidiary  banks  exclusively  for  foreign  business 

with  special  reference  to  its  connection  with  the 

industrial  export  policy 527 

Section  8.  Reform  proposals  concerning  bank  deposits,  and  their 

justification 546 

I.  General  observations 546 

1 .  "  Safety  of  depositors ' '  a  reason  for  reform  proposals .       549 

2.  Particular  proposals  made  with  this  end  in  view  by 

Caesar  Straus,  Otto  Warschauer,  and  Count  von 
Arnim-Muskau 549 

3.  Reform  proposals  based  on  other  considerations 

(Heiligenstadt) 553 

4.  Considerations  on  which  the  first-named  reform  pro- 

posals are  based 554 

(a)  Supposed  superiority  of  the  English  bank- 
ing system 555 

(6)  The  alleged  small  own  resources  (share 
capital  and  surplus)  of  the  German  credit 

banks 559 

(c)  The  liquidity  of  the  resources  of  the  Ger- 
man credit  banks.  Coefficient  of  li- 
quidity    561 

II.  Criticism  of  the  individual  reform  proposals 573 

i .  The  creation  of  a  central  private  deposit  bank  or  of 
a  government  deposit  bank  for  the  German 
Empire  and  of  similar  deposit  banks  for  each  of 
the  German  States 573 

vn 


National    Monetary     Commission 

Page. 

CHAPTER  II. — The  German  great  banks  during  the  second  period 

(1870  to  the  present) — Continued. 
Section  8.  Reform  proposals  concerning  bank  deposits,  and  their 

justification — Continued. 
II.  Criticism  of  the  individual  reform  proposals — Continued. 

2.  The  granting  of  priority  rights  to  depositors 577 

3.  The  fixing  of  a  legal  ratio  between  savings  deposits 

and  the  share  capital 578 

4.  Legal  regulations  regarding  the  investment  of  de- 

posits        579 

5.  Depositing  a  certain  portion  of  the  private  deposits 

at  the  Reichsbank 580 

6.  Publication  of  summary  bank  statements  according 

to  a  legally  prescribed  form 589 

7.  Penalty  for  "banks  and  bankers  who  by  public  or 

written  appeals,  or  through  agents  solicit  deposits 

or  savings  " 597 

8.  A  supervisory  board 599 

Concluding  observations 600 

PART  IV. 

PROGRESS  OF  CONCENTRATION  IN  GERMAN  BANKING  DURING  THE  SECOND 
PERIOD  (1870  TO  THE  PRESENT). 

CHAPTER  I. — Causes  of  the  concentration  movement 602 

1.  General  causes 602 

2.  Special  causes 606 

CHAPTER  II.— Causes  determining  the  extent  and  rapidity  of  the 

concentration  movement 5™ 

Section  I.  General  causes gj, 

Section  2,  Special  causes 6I4 

I.  The  liquidation  of  banks  during  the  seventies 614 

II.  The  cartel  movement  in  industry  during  the  nineties. ...  614 

III.  Mistakes  of  (Stamp  and  bourse)  legislation 618 

Decline  of  the  class  of  private  bankers 619 

IV.  Special  causes  of  the  rapidity  of  the  concentration  move- 

ment during  1901-1904 5-  - 

1.  The  crises  of  the  years  1873  and  1900 635 

2.  The  founding  of  the  United  States  Steel  Corpora- 

tion, February  23,  1901 5^0 

3.  The  founding  of    the    Steel    Works'    Union    in 

Dusseldorf ,  March  i,  1904 640 


vm 


Table      of     Contents 

Page. 

CHAPTER  III. — Methods  and  forms  of  concentration 641 

Section  I.  Outward  course  of  development 641 

A.  The  several  (8)  great  banks  (see  Appendix  VII) 641 

B.  The  aggregate  capital  power  represented  by  the  great 

bank  groups 642 

I.  The  group  of  the  Deutsche  Bank 643 

II.  The  group  of  the  Disconto-Gesellschaft 644 

III.  The  group  of  the  Dresdner  Bank 644 

IV.  The  group  of  the  A.  Schaaffhausen'scher  Bank- 

verein 645 

V.  The  group  of  the  Darmstadter  Bank 645 

Section  2 .  General  tendencies  and  forms  of  concentration 647 

I.  Scheme  of  general  development 647 

II.  The  two  periods  in  the  history  of  concentration 651 

Tables  regarding  the  general  development  of  concen- 
tration within  the — 

1.  Great  banks   (see   Appendix  VIII,   Tables 

1-8) 1008 

2.  Allied  banks  (see  Appendix   VIII,  Table 

10) ion 

Section  3.  The  several  ways  and  forms  of  concentration,  their 

advantages  and  disadvantages 653 

I.  Local  concentration 653 

II.  Concentration  of  capital  and  power 656 

A.  In  a  direct  way 656 

1 .  By  means  of  increase  of  capital 656 

2.  Through  absorption  of  banking  firms  and  fusions 

of  banks 658 

3.  Through  the  creation  of  permanent  communities 

of  interest 664 

The  communities  of  interest  in  the  mining  re- 
gions   (Upper    Silesia    and    Rhineland-West- 

phalia) 666 

(a)  through  the  founding  of  subsidiary  and 
trust  companies 667 

(b)  through  acquisition  of  shares 672 

(c)  through  agreement 673 

(d)  through  exchange  of  shares 677 

B.  In  an  indirect  way,  by  means  of  decentralization 

of  operations,  viz,  through  the  founding  of — 

1.  Commandites  (silent  partnerships) 680 

2.  Branches 684 

3.  Agencies 696 

4.  Deposit  offices 699 


IX 


National    Monetary     Commission 

PART  vO 

Page. 
The  mutual  influence  of  concentration  in  banking  and  in  industry .  .       703 

I.  Industrial  concentration  and  its  principal  causes 703 

II.  Influence  of  the  banks  and. banking  concentration  on  indus- 
trial concentration 712 

1.  On    industrial    concentration,    unaffected    or    but 

slightly  affected  by  the  formation  of  cartels 712 

(a)  the  electro-technical  industry 713 

(6)  the  chemical  industry 721 

2.  On  concentration  in  industries  with    strong   cartel 

tendencies  (the  mining  and  metallurgical  indus- 
tries)         725 

III.  Influence  of  industry  and  industrial  concentration  on  con- 
centration in  banking 750 

PART  VI. 

The  situation  resulting  from  concentration;  advantages  and  dangers 

of  concentration;  the  outlook  for  the  future 751 

NOTES 785 

APPENDICES. 

I.  Bibliography 883 

II.  German  credit  banks  founded  during  the  years  1848-1856. . .  .       892 

III.  German  credit  banks  in  1872 893 

IV.  Representation  of  the  great  banks  on  the  supervisory  boards  of 

stock  companies 897 

V.  Value  of  securities  issued  at  the  Berlin  Stock  Exchange  by  the 

great  banks  during  the  years  1882-1908 921 

VI.  Value  of  securities  issued  at  all  German  Stock  Exchanges  by 

the  great  banks  during  the  years  1897-1908 959 

VII.  Development  of  concentration  of  the  German  great  banks 982 

VIII.  Progress  of  concentration  within  each  of  the  great  banks  and 

within  the  banks  allied  with  them I0o8 

Notes  to  Appendices  VII  and  VIII I0i3 

1019 


PREFACE. 

In  publishing  the  third  edition  of  the  present  book, 
which  first  appeared  in  1905,  the  author  has  tried  to  com- 
ply with  the  general  wish  to  avoid  as  much  as  possible 
the  mere  reproduction  of  the  text  of  the  ten  lectures  on 
which  the  early  editions  were  originally  based.  Instead 
of  this,  the  present  edition  marks  the  partial  realization  of 
the  idea  of  the  larger  work  which  the  author  has  con- 
stantly had  in  mind  from  the  very  beginning. 

The  author  has  tried  to  fulfil  the  expectation  and 
wishes  of  the  critics  (whose  suggestions  are  always  wel- 
come) to  the  best  of  his  ability  and  so  far  as  the  time  at 
his  disposal  permitted.  The  present  edition  has  been 
completely  reshaped  and  considerably  enlarged — as  indi- 
cated in  the  title  of  the  book — although  the  fundamental 
features  of  the  work  and  the  particular  treatment  of  the 
concentration  movement  have  been  retained. 

For  this  purpose  it  became  necessary  in  the  first  place 
to  enlarge  on  the  description  of  German  economic  devel- 
opment from  1848  to  1870,  and  from  1870  up  to  the 
present  day,  in  so  far  as  this  development  exercised  a 
determining  influence  on  the  growth  of  German  banking. 
In  the  second  place  an  attempt  has  been  made,  as  far 
as  existing  material  permitted,  to  present  in  nearly  every 
chapter  the  separate  development  of  each  great  bank, 
without,  however,  obscuring  the  picture  of  the  general 
development. 


XI 


National    Monetary     Commission 

In  a  separate  chapter  a  comprehensive  view  is  given  of 
the  general  management  and  development  of  the  six  great 
Berlin  banks.  Accordingly  it  also  became  necessary  to 
present  a  systematic  description  of  the  most  important 
debit  and  credit  transactions  of  the  banks.  This  per- 
mitted the  generally  desired  and  fully  justified  examina- 
tion of  the  question  whether  and  to  what  extent  the 
German  great  banks  have  actually  fulfilled  in  the  inter- 
ests of  the  community  the  important  and  numerous  tasks 
set  forth  in  the  introductory  chapter. 

In  discussing  the  credit  and  debit  business  of  the  banks 
it  became  possible  also  to  devote  some  space  to  the  treat- 
ment of  questions  of  technical  methods  and  business  pol- 
icy, which  had  been  entirely  kept  out  from  the  earlier 
editions. 

It  will  be  found  that  the  chapter  (VIII)  devoted  to  the 
analysis  and  criticism  of  the  reform  proposals  in  the  field 
of  bank  deposits,  which  were  discussed  quite  fully  even 
in  the  first  edition,  has  been  greatly  enlarged,  for  the  rea- 
son that  these  proposals  may  be  said  to  occupy  at  present 
the  center  of  German  banking  discussion.  A  further 
reason  was  that  in  the  meantime  the  views  of  the  various 
experts  have  been  published,  as  presented  before  the  Bank 
Inquiry  Commission,  of  which  the  author  was  a  member. 
An  analysis  and  appreciation  of  these  views  seemed  there- 
fore pertinent. 

Another  subject  which  had  to  be  passed  over  lightly  in 
the  former  editions — though  against  the  wishes  of  the 
author — viz,  industrial  concentration  and  the  influence 
which  the  concentration  of  banking  exercises  on  it,  has 
now  been  treated  in  greater  detail.  However,  for  lack  of 


xn 


P  r  e  f  a  c  e 

space  this  chapter  even  now  is  limited  to  a  study  of  this 
movement  in  a  few  typical  and  specially  important 
branches  of  industry. 

Suggestions  as  to  form  have  also  been  adopted  as  far  as 
possible.  Much  discursive  matter,  hitherto  contained  in 
the  notes,  has  been  incorporated  in  the  text.  On  the 
other  hand  large  statistical  tables,  which  formerly  were 
part  of  the  text,  and  thus  broke  up  the  continuity  of 
presentation,  have  been  removed  to  the  end  of  the  book  in 
the  form  of  appendices. 

A  series  of  what  I  consider  very  important  statistical 
appendices  has  been  substituted  for  those  printed  in  the 
earlier  editions.  For  the  preparation  and  checking  of 
these  tables  I  desire  to  express  my  best  thanks  to  Dr. 
Berthold  Breslauer,  of  Berlin,  the  editor  of  the  statistical 
part  of  the  Bank  Archil).  The  tables  showing  the  amount 
of  listed  securities  issued  by  the  six  great  Berlin  banks — 
constituting  Appendices  V  and  VI — for  the  first  time 
provide  complete  material  based  on  official  data  concern- 
ing this  important  subject. 

Appendix  VIII — treating  of  the  course  of  the  concen- 
tration movement  in  the  case  of  the  eight  greatest  Berlin 
banks — has  been  brought  down  to  December  31,  1908. 

It  is  hoped  that  the  book  in  its  new  shape  will  meet 
with  the  same  friendly  reception  which  has  been  accorded 
to  its  earlier  editions  and  that  it  will  be  found  a  reliable 
reference  work,  equally  free  from  fulsome  commendation 
and  from  undue  depreciation  of  the  work  of  the  German 
credit  banks. 

ROME,  April ,  7909. 


xiir 


TRANSLATOR'S  NOTE. 

Prof.  Riesser's  work,  Die  deutschen  Grossbanken  und  ihre 
Konzentration,  of  which  the  present  volume  is  a  transla- 
tion, gives  the  most  recent  and  fullest  account  of  the 
development,  present  organization,  and  practices  of  the 
more  important  German  so-called  credit  banks,  par- 
ticularly the  six  largest  banks,  which,  with  the  possible 
exception  of  one,  may  be  said  to  have  their  central  office 
in  Berlin.  The  name  credit  bank,  which  has  been  retained 
in  the  translation,  in  no  way  characterizes  the  actual  scope 
of  activity  of  these  banks,  but  is  the  term  used  in  recent 
German  banking  literature  to  differentiate  the  commercial 
joint-stock  and  kindred  banks  without  the  note-issue 
privilege  from  other  banks  having  a,  more  restricted  and 
special  field  of  operations,  such  as  the  mortgage  banks, 
the  mutual  or  cooperative  banks,  the  savings  banks,  etc. 

The  book  abounds  in  technical  legal  and  banking 
terminology,  for  which  no  exact  equivalents  in  English 
exist.  In  numerous  cases  no  translation  was  attempted. 
In  other  cases  where  the  terms  occur  frequently  through- 
out the  volume,  a  choice  of  an  English  equivalent,  though 
more  or  less  arbitrary,  had  to  be  made.  This  applies 
particularly  to  the  term  Depositen,  the  definition  of  which 
the  author  declares  to  be  impracticable.  (See  p.  196 
et  seq.)  In  German  bank  statements  different  meanings 
are  attached  to  the  term  by  various  institutions ,  the  only 
common  feature  being  that  interest  is  allowed  on  these 
"deposits." 

xv 


T r  an  s  I  at  o  r's     No  t  e 


An  important  function  of  the  German  credit"  banks  is 
the  financing  of  corporations  and  the  selling  to  the  public 
of  the  newly  created  securities  of  these  corporations. 
Throughout*  the  volume  this  latter  practice  has  been 
designated  as  the  issuing  activity  of  the  credit  banks. 
The  success  of  these  operations  depends  largely  upon  the 
" issue  credit"  of  the  bank — i.  e.,  the  confidence  of  the 
investing  public  in  the  soundness  of  the  securities  offered 
by  the  bank.  In  several  cases  a  literal  translation  of 
German  technical  terms  seemed  entirely  proper,  though 
such  terms  as  pure  and  mixed  works  (p.  175),  mine  fur- 
naces, furnace  mines  (p.  369),  heavy  industry,  and  the 
like,  even  with  proper  explanations  in  the  text,  may  be 
regarded  by  some  as  literary  barbarisms. 

The  proofs  of  the  translation  have  been  submitted  to 
the  author,  who  made  several  changes  in  the  text  which 
do  not  appear  in  the  German  original.  The  figures  bearing 
upon  American  banking  have  been  revised  and  brought 
up  to  date.  Thankful  acknowledgment  is  due  to 
Dr.  Robert  Stein,  of  Washington,  D.  C.,  and  Dr.  H.  G. 
Friedman,  of  New  York  City,  for  valuable  help  rendered 
to  the  translator. 

MORRIS  JACOBSON. 

WASHINGTON,  D.  C.,  August,  1911. 


XVI 


THE  GERMAN  GREAT  BANKS  AND 
THEIR  CONCENTRATION. 


PART  I. 

INTRODUCTION— THE  TASKS  OF  BANKS  IN 
ECONOMIC  LIFE. 

(l)    GENERAL  CONSIDERATIONS. 

Walther  Lotz,  in  his  excellent  book  on  the  methods 
of  floating  securities  (Die  Technik  des  Emissiongeschdfts, 
1890),  makes  the  following  statement  (p.  60): 

"One  of  the  most  prominent  financiers  in  Berlin  once 
remarked  to  me  that  his  profession  was  not  affected  by 
the  social  question,  which  was  usually  regarded  as  the  most 
important  factor  in  economic  development,  and  that  the 
speculative  banks  adopted  a  neutral  attitude  toward  it." 

To  my  mind  this  statement  proves  that  the  Berlin 
financier  in  question  has  strangely  misconceived  the  posi- 
tion and  duties  of  German  banking  within  the  realm  of 
" capitalistic  economics."1  To  prove  this  in  detail  is 
neither  the  least  nor  the  most  unimportant  aim  of  the 
present  work. 

Within  the  range  of  capitalistic  economics  there  is  a 
whole  series  of  important  and  special  economic  tasks 
devolving  on  banks  and  bankers. 

To  begin  with,  the  funds  are  capital  in  the  popular  sense 
of  the  word  (that  is,  sums  of  money  constituting  com- 


90311°— n- 


National    Monetary     Commission 

ponent  parts  of  wealth  to  be  devoted  to  producing  in- 
come)2 which  accumulate  in  the  safes  of  banks  and  bank- 
ers. It  is  the  bankers'  profession  and  duty  not  only  to 
take  care  of  the  capital,  but  to  turn  it  to  good  account, 
i.  e.,  to  make  it  productive,  particularly  by  placing  it  at 
the  disposal  of  others  for  industrial  and  other  purposes.3 

Banks  have  to  receive  the  funds  placed  at  their  dis- 
posal for  the  purpose  of  investment  and  profitable  utili- 
sation, and  to  direct  them  into  proper  channels  through 
the  granting  of  credit. 

The  bank  enters  into  relations  on  the  one  hand  with 
the  capitalist  who  entrusts  to  it  his  available  money  for 
productive  investment  and  thus  becomes  its  creditor,  and 
on  the  other  hand,  with  entrepreneurs  and  others  who 
receive  money  for  their  ventures,  and  thus  become  its 
debtors. 

The  part  which  a  bank  plays  in  its  relations  between 
capitalists  and  persons  engaged  in  various  enterprises  is 
similar  and  as  important  as  that  of  the  trader  who  acts  as 
independent  middleman  between  producer  and  consumer, 
and  who  participates  in  the  increase  of  values  by  trans- 
porting goods  with  or  without  intermediate  manufacture 
from  districts  where  supply  is  plentiful  to  districts  where 
demand  is  great. 

The  so-called  regular  or  current  banking  business  is  con- 
fined to  the  acceptance  and  granting  of  such  or  similar 
credit  (so-called  credit  and  debit  transactions).  It  in- 
cludes deposits,  current  accounts,  bill,  contango,  lombard, 
and  commission  business. 

The  tasks  involve,  as  far  as  is  practicable  within  such 
limits,  the  direct  furtherance  of  the  power  of  production  of 


The     German     Great    Banks 

all  industries,  including  (after  what  has  been  said  above) 
commerce,4  and  indirectly  the  furtherance  of  the  pur- 
chasing power  of  all  classes  of  the  community.5  They 
necessitate  endeavors  for  the  investment  of  surplus  capital 
in  a  suitable  and  economic  manner,  and  its  utilisation 
for  credit  transactions. 

In  the  next  place,  banks  and  bankers  have  to  provide 
for  a  sound  and  constant  regulation  of  the  circulation  of 
money  and  the  adjustment  of  money  settlements  in  so 
far  as  these  functions  do  not  fall  within  the  province  of 
special  public  banks.  They  also  have  to  provide  for  a 
banking  organisation  of  the  whole  commercial  system  of 
payment,  and  above  all  for  an  increase  of  those  forms  of 
settlement  which  tend  to  take  the  place  of  cash:  in  par- 
ticular the  employment  of  checks,  transfers  (giro),  and 
bank  clearing.6  Finally,  they  have  to  establish  organic 
relations  between  the  systems  of  credit  and  payment, 
by  using  their  credit  to  convert  the  claims  of  their  cus- 
tomers in  the  shape  of  bills,  checks,  money  orders,  etc., 
into  current  paper,  and  thus  into  ready  money,  using  this 
latter  for  the  purpose  of  meeting  payment  on  matured 
obligations.7 

The  historical  development  of  German  banking,  how- 
ever, has  considerably  enlarged  the  scope  of  these  duties. 

The  transformation  effected  since  the  middle  of  the 
nineteenth  century  in  the  whole  system  of  communica- 
tions through  the  use  of  steam  for  ships  and  railways  (see 
p.  34),  and  the  revolution  in  many  industrial  branches, 
caused  by  the  appearance  of  the  steam  engine,  in  con- 
junction with  the  creation  of  a  large  and  unified  German 
economic  territory  through  the  customs  union  of  the  Ger- 


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man  States  (Zollverein,  1833),  paved  the  way  for  the  ex- 
pansion and  world-wide  aspirations  of  German  industry, 
and  thus  gave  the  impulse  to  large-scale  production  in 
many  branches  of  industry. 

Thus  it  became  necessary  that  capital  as  well  as  credit 
should  be  devoted  to  the  building  of  plants  and  works  in 
sums  and  for  periods  hitherto  seldom  required,  if  produc- 
tion on  a  large  scale  was  to  be  maintained  and  extended. 
This  could  only  be  made  possible  by  the  issue  of  shares  or 
debentures. 

The  joint  stock  company  proving  the  most  reliable  ally 
of  trade  and  industry,  conducted  on  a  large  scale,  it 
became  necessary  to  transform  private  concerns  into  joint 
stock  companies  and  to  establish  new  industrial  enter- 
prises in  the  shape  of  stock  companies,  whenever  it  was 
desired  to  increase  the  credit  of  existing  private  concerns, 
to  enlarge  or  diversify  production,  or  to  enable  domestic 
industry  to  enter  into  competition  with  foreign  producers. 

The  general  public  in  Germany,  whose  funds  were 
meager  compared  to  those  of  England,  was  neither  able 
nor  willing  at  this  juncture  to  participate  directly  or  per- 
manently in  such  ventures  as  mentioned  above.  The 
private  individual  fought  shy  of  investing  his  capital  in 
enterprises,  and,  content  with  smaller  interest,  bought 
government  securities.8 

Adequate  assistance  for  the  demands  of  capital  and 
credit  could  not  be  expected  from  the  existing  note-issuing 
banks,9  whose  increase  had  long  been  advocated  in  the 
interest  of  increased  facilities  of  payment,  as  the  extent 
of  their  activity  was  naturally  limited  by  their  special 
functions.  In  the  same  manner  private  bankers,  who  at 


The     German     Great    Banks 

that  time  were  very  powerful,  at  least  in  several  centers 
(see  below,  p.  39),  could  supply  only  modest  means  for 
such  purposes — means  which  could  neither  suffice,  nor 
be  tied  up  for  any  length  of  time.  In  addition  to  this,  the 
organisation  of  the  banking  business  at  that  period  was 
in  general  neither  prepared  for,  nor  adapted  to  operations 
of  such  a  comprehensive  and  difficult  nature  (see  below, 
p.  40). 

For  these  reasons  such  new  and  enormous  demands 
could  be  met  only  by  the  creation  of  special  organs, 
namely  joint  stock  banks,  which  were  called  into  exist- 
ence to  satisfy  these  very  requirements.  In  the  natural 
course  of  things  the  banks  gradually  became  the  pro- 
fessional and  expert  intermediaries  in  meeting  the  new 
financial  wants.  This  they  were  able  to  do  only  through 
continuous  and  systematic  study  of  the  money  market, 
as  well  as  of  the  markets  for  the  newly  created  securities, 
especially  among  their  own  customers.  Moreover,  both 
the  continuity  of  their  existence  and  regard  for  their  own 
issue  credit  (Emissionskredit) ,  i.  e.,  the  permanent  ability 
of  maintaining  among  the  German  public  a  market  for 
new  securities  issued  under  their  auspices,  insured  a  per- 
manent interest  on  the  part  of  these  banks  in  the  newly 
created  undertakings  as  well  as  in  the  securities  which 
they  were  instrumental  in  placing  on  the  market. 

It  is,  therefore,  too  narrow  a  view,  and  consequently 
incorrect,  to  assume  that  (10)  "  the  assistance  of  the  numer- 
ous private  bankers,  equally  conspicuous  for  intelligence 
and  wealth,  would  have  amply  sufficed  for  all  the  tasks 
described  above,"  and  that  the  German  credit  banks  grew 
up  solely,  or  almost  exclusively,  because  the  general  public 


National    Monetary     Commission 

'rushed  madly  after  the  most  speculative  of  securities,' 
and  because  of  the  endeavours  made  to  cater  as  far  as 
possible  to  this  speculative  craze  for  railway,  mining, 
and  foundry  shares."  It  must,  however,  be  acknowledged 
that  these  reasons  did  play  a  certain  part  in  the  matter, 
especially  the  desire  of  the  smaller  capitalists  to  par- 
ticipate indirectly  in  the  industries  promoted  by  the  new 
banks  by  the  speculative  acquisition  of  shares  in  these 
banks  ("speculating  on  speculation"). 

It  has  been  said  concerning  Saxony,  that  although 
the  number  of  private  banks  was  large  for  the  time  in 
question,  yet  "their  powers  were  inadequate  to  satisfy 
the  credit  requirements."11  There  is  ample  testimony  to 
prove  that  this  was  not  solely  a  local  symptom,  and  a 
mere  glance  at  the  security  issues  made  during  that  first 
period  leaves  the  same  impression.  Moreover  it  is  stated 
that  it  was  just  among  private  bankers  of  that  period  that 
"the  necessity  for  concentration  of  capital  was  felt  the  most, 
and  that  a  remedy  was  being  looked  for."12  We  know 
that  the  committees  which  in  almost  all  German  States 
were  petitioning  for  concessions  (in  Prussia  long  in  vain, 
as  is  well  known)  for  the  establishment  of  note  issuing 
and  credit  banks,  were  composed  for  the  most  part  of 
private  bankers.13 

Schaffle  14  goes  even  further  in  the  following  statement 
published  in  a  monograph  about  1856: 

"When  industrial  development  has  reached  the  stage 
at  which  great  industries  are  forced  to  acquire  their  capital 
largely  through  the  gathering  of  small  capitals,  special 
economic  organisations  must  develop  on  which  special 
functions  regarding  the  initiative  in  stock  transactions 


The     German     Great    Banks 


devolve.  Banks  for  the  promotion  of  such  enterprises 
meet  this  need. 

"  As  long  as  these  premises  for  the  economic  justification 
of  speculative  banks  have  not  been  scientifically  refuted 
scientists  should  not  allow  themselves  to  be  terrified  by 
the  mere  catchword  'credit  mobilier',  like  children  by  a 
bogy." 

In  this  manner  then,  according  to  historical  development, 
the  stock  issuing,  promotion,  and  conversion  business  in 
Germany  became  a  regular  banking  business,  i.  e.,  a 
branch  of  the  regular  business  of  credit  banks,  which  a't 
the  same  time  carried  on  the  so-called  current  business. 
On  the  other  hand,  in  view  of  the  relatively  small  amount 
of  the  available  funds  for  bank  investment  proper,  no 
attempts  were  made  to  establish  special  deposit  banks, 
as  under  the  circumstances  but  little  profit  could  be 
expected  from  them. 

Even  those  persons  who  on  principle  are  opposed  to  the 
whole  capitalistic  and  industrial  development  as  it  mani- 
fested itself  in  Germany  during  the  last  decades,  and  who 
have  no  sympathy  for  this  expansion  of  the  regular  busi- 
ness of  the  German  banks,  but  rather  deplore  and  find 
fault  with  it,  will  not  be  able  to  alter  this  course  as  long  as 
the  reasons  exist  which  have  led  up  to  this  development. 

I  am  convinced  that  these  reasons  will  continue  to  exist 
for  some  time  to  come,  owing  to  Germany's  rapidly 
increasing  population,  her  moderate  wealth  (at  least  in 
comparison  to  other  countries) ,  also  because  of  her  inter- 
national position  in  trade  and  industry,  a  position  attained 
with  difficulty,  but  which  it  will  be  even  harder  to  main- 
tain permanently. 


National    Monetary     Commission 

It  will  be  seen  by  the  description  of  the  historical 
development  of  the  sphere  of  activity  of  the  German 
banks,  that  a  proper  and  socially  sound  administration 
and  organisation  of  the  different  departments  of  banking 
(especially  of  the  last-mentioned  branches),  is  one  of  the 
most  important  social  problems.  Moreover  as  there  are 
as  many  social  problems  as  there  are  spheres  of  social 
activity,  and  the  various  branches  of  banking  are  of  the 
utmost  importance  in  the  economic  life  of  the  nation,  the 
banking  problem  is  closely  interwoven  with  the  majority 
of  the  other  social  problems,  a  fact  which  is  in  absolute 
contradiction  with  the  statement  of  the  eminent  financier 
quoted  by  I^otz. 

2 — SPECIAL   CONSIDERATIONS, 
(a)  THE  TASKS  OF  BANKS  DURING  NORMAL  TIMES. 

The  proposition  last  enunciated  must  be  proved  in 
detail  by  a  discussion  of  the  main  directions  of  banking 
activity. 

It  certainly  does  not  lie  within  the  power  of  the  indi- 
vidual or  the  legislator,  or  even  of  the  administration  of 
the  largest  bank,  to  arrange  matters  in  such  a  manner 
that  only  the  best  sides  of  the  capitalistic  system  may  pre- 
vail in  economic  life.  It  is,  however,  the  most  urgent  and 
eminent  duty  of  banks  and  bankers  to  endeavor,  at  least 
within  the  scope  of  their  activity,  and  as  far  as  is  within 
their  powers,  to  effect  this  as  far  as  practicable,  and  to  see 
that  the  profit  and  loss  account  of  capitalistic  economics 
is  closed  with  a  balance  in  favour  of  economic  progress. 

Above  all,  they  must  promote  all  the  economic  interests 
of  the  nation,  i.  e.,  the  interests  of  all  producing  classes 


The     German     Great    Banks 

without  distinction,  in  so  far  as  the  services  and  the 
credit  required  by  them  come  within  the  sphere  of  bank- 
ing activity,  and  do  not  conflict  with  the  necessary  pre- 
mises of  sound  banking  policy.  These  latter  conditions 
are  determinative  of  the  kind  and  extent  of  support 
which  the  so-called  " credit  banks"  are  in  a  position  to 
grant  to  agriculture. 

In  the  next  place  they  have  to  keep  the  amount  of 
credit  to  be  granted  within  reasonable  bounds,  and  to  offer, 
as  far  as  is  within  their  power,  the  utmost  opposition  to  an 
unsound  demand  for  credit.  The  banks  must  therefore 
endeavor  to  obtain  at  all  times  a  comprehensive  and  accu- 
rate insight  into  the  general  conditions  of  the  branches 
of  industry  and  trade  chiefly  dependent  on  them  for  sup- 
port, in  order  to  be  able  to  discriminate  between  necessary 
requirements  and  false  hankerings  after  expansion  and 
aggrandizement.  They  should  also  be  able  to  intervene, 
or  at  least  restrain  and  check,  in  cases  where  the  form 
and  extent  of  the  credit  received  cause  the  fear  of  unsound 
development. 

Their  duties  toward  the  investment-seeking  public  are 
those  of  the  honest  broker,  who,  by  reason  of  his  expe- 
rience and  expert  knowledge,  is  able  to  draw  attention 
to  the  advantages  and  dangers  of  investments,  and  par- 
ticularly to  explain  in  a  purely  objective  manner  the 
dangers  connected  with  securities  yielding  excessive  inter- 
est or  dividends. 

As  regards  acceptances,  they  ought  to  place  their  serv- 
ices at  their  customers'  disposal  only  for  economically 
sound  purposes.  They  should  keep  the  brokerage,  the 
contango  and  deposit  business  within  normal  limits,  and, 


National    Monetary     Commission 

as  far  as  it  is  possible  to  divine  the  purposes  aimed  at, 
to  operate  in  such  a  manner  that  these  transactions  may 
not  become  a  cloak  for  reckless  and  unsound  speculation. 

In  the  issue  business  they  should  take  particular  care 
not  to  burden  the  market  by  an  overproduction  of  securi- 
ties or  by  the  promotion  of  shaky  ventures,  for  thereby  they 
might  not  only  cause  heavy  loss  to  the  purchasers  of  such 
securities,  but  also  inflict  lasting  and  severe  injury  on 
their  own  issue  credit. 

More  especially  they  should  transform  only  such  under- 
takings into  joint  stock  companies  as  are  naturally  suited 
to  that  particular  form  of  commercial  organisation.  Be- 
fore deciding  to  promote  or  transform  such  undertakings, 
they  should  make  very  cautious  estimates  regarding  the 
possible  profits  of  these  undertakings.  In  addition  to  this, 
they  should  investigate  the  financial  position  of  the  whole 
branch  of  industry,  or  business  concerned,  and,  as  far  as 
possible,  form  an  opinion  as  to  its  future  prospects  and 
risks.  Finally,  they  should  pursue  not  only  a  sound 
dividend  policy,  but  also  a  proper  economic  policy;  resist- 
ing the  temptation  of  momentary  profits,  they  should 
abstain  from  business  that  does  not  appear  economically 
sound,  or  might  be  detrimental  to  the  business  interests 
of  the  nation. 

The  problems  which  the  German  banks  have  to  solve 
during  ordinary  times  have  become,  step  by  step,  more 
comprehensive,  more  difficult,  and  more  important. 
The  number  of  these  tasks  and  the  sphere  of  activity  of 
the  German  banks  have  grown  with  the  increasing  size, 
consolidation,  and  power  of  the  country.  The  banks, 
particularly  the  ' 'great  banks,  "  were  called  upon  to  lend 


The     German     Great    Banks 

intelligent  support  to  the  Reichsbank  (founded  in  1875-76) 
in  its  currency  and  discount  policies,  and  in  its  endeavors 
to  introduce  and  promote  "giro,"  clearing,  and  check 
transactions,  though  this  support  was  not  always  forth- 
coming to  the  full  extent.  Another  task  which  fell  to 
their  lot — and  of  which  they  can  neither  be  said  to  have 
acquitted  themselves  quite  satisfactorily — was  to  support 
the  land  policy  of  the  government  and  municipalities  by 
means  of  the  mortgage  banks  and  real-estate  companies 
which  they  had  established  against  purely  speculative  and 
other  undertakings  which  made  no  allowance  for  public 
interests.  In  countless  ways,  especially  by  an  active  par- 
ticipation in  the  organisation  of  state  and  municipal 
credit,  they  were  called  upon  to  make  possible  the  accom- 
plishment of  important  state  and  administrative  tasks,  as 
well  as  to  promote  the  growth  of  German  towns  and  the 
development  of  German  ports,  railroads,  and  highways. 
They  were  called  upon  to  organise  German  inland  naviga- 
tion, as  well  as  to  provide  for  the  development  of  the 
German  railway  system,  and  for  the  industrial  utilisation 
of  electric  light  and  electric  power.  They  had  to  assist  by 
counsel  and  deed  the  business  man  crossing  the  seas  as 
pioneer  of  German  trade.  It  became  their  function  to 
support  the  industrial  export  policy  of  the  nation  when 
it  came  to  be  considered  in  Germany  an  economic  neces- 
sity, and  to  promote  the  economic  development  of  the 
colonies,  as  well  as  of  German  cable  communications  by  a 
series  of  undertakings  not  promising  immediate  returns. 
They  had  to  strengthen  our  financial,  and  with  it  our 
political,  influence  abroad;  nor  was  this  done  without 
many  a  bitter  experience.  For  in  this  field  they  met  the 


National    Monetary     Commission 

competition  of  the  majority  of  the  great  powers  in  the 
underwriting  of  foreign  loans,  the  promoting  of  foreign 
undertakings,  and  the  opening  of  international  business 
relations,  with  the  disadvantage  that  their  rivals  had 
entered  the  field  long  before  them.  By  assisting  German 
navigation,  and  establishing  German  banks  abroad,  they 
imparted  to  the  German  name  a  renown  previously  un- 
dreamed of,  thus  extending  by  their  activity  the  sphere  of 
German  business  and  political  influence.  Finally,  by  a 
cautious  financial  policy,  they  prepared  our  financial  read- 
iness for  war,  a\id  for  the  carrying  on  of  war. 

How  and  to  what  extent  German  banks  acquitted  them- 
selves of  all  these  tasks  will  be  set  forth  in  the  following 
pages. 

Difficult  and  numerous  as  are  the  problems  of  external 
policy,  those  of  internal  policy  are  no  easier.  Success  in 
the  latter  field  became  conditioned  upon  the  recognition 
of  two  principles  as  the  basis  of  all  business  activity. 
Furthermore  these  principles  had  to  be  observed  under  all 
vicissitudes,  in  the  hurry  of  everyday  life,  in  the  pur- 
suit of  business,  and  in  the  finding  of  ways  and  means 
for  the  carrying  out  of  new  and  urgent  tasks  as  they  con- 
tinually crop  up. 

These  two  principles  are:  The  principle  of  the  distribu- 
tion of  risks,  on  the  one  hand,  and  the  principle  of  the 
liquidity  of  assets  on  the  other. 

Nearly  all  the  mistakes  made  in  German  banking,  and 
the  reproaches  leveled  against  it,  can  be  traced  back  to  the 
violation,  or  misconception,  of  these  fundamental  prin- 
ciples underlying  every  sound  banking  policy.  The  prin- 
ciple of  the  distribution  of  risks  must  be  observed  in  almost 


12 


The     German     Great    Banks 

all  branches  of  banking  activity ;  not  only  in  the  granting  of 
short  or  long  credit,  but  also  in  the  promotion,  conver- 
sion, emission,  and  syndicate  business.  It  implies,  among 
other  matters,  that  no  single  branch  of  current  business 
shall  be  exclusively  fostered  in  an  excessive  and  unsound 
manner  at  the  expense  of  others;  that  the  entire 
amount  of  blank  credit,  granted  after  the  most  careful 
scrutiny,  shall  not  bear  an  unsound  proportion  to  the 
total  of  secured  credit;  further,  that  credit  granted  to  a 
single  undertaking,  or  branch  of  industry,  shall  not  be 
too  high;  that  in  case  of  underwriting  and  share  issues 
provision  shall  be  made  for  a  fitting  distribution  of  par- 
ticipations; for  there  is  always  the  possibility  of  a  sud- 
den change  in  political  and  economic  conditions,  as  well 
as  of  changes  in  the  market  which  may  affect  particular 
cases.  It  therefore  becomes  necessary  to  bear  in  mind 
constantly  the  need  of  the  diminution  of  risk,  even  in  the 
most  promising  ventures  and  during  the  most  favored 
state  of  the  market. 

The  securing  and  maintaining  of  the  liquidity  of  the 
assets  is  another  most  essential  task  incumbent  on  a 
banker.  Indeed,  in  view  of  the  variety  of  claims  made  on 
the  resources  of  bankers  and  banks,  and  of  the  multi- 
plicity of  aims  pursued  by  them,  it  is  one  of  the  most 
difficult  problems  of  banking  policy.  It  is  all  the  more 
difficult,  since  the  establishment  of  the  right  proportion 
of  the  so-called  quick  assets  to  the  liabilities,  especially  to 
the  obligations  falling  due  at  any  time,  or  within  a  cer- 
tain period,  does  not  always  depend  solely  on  the  will  and 
discernment  of  the  Bank.  Possibilities  have  constantly 
to  be  reckoned  with;  for  instance,  that  the  issue  of  new 


National    Monetary     Commission 

shares  required  to  restore  the  necessary  liquidity  of  the 
bank's  resources  after  a  great  increase  of  business  is  im- 
possible during  bad  or  critical  times;  that  consequently 
its  assets  would  be  tied  up  just  at  the  very  moment  when 
it  might  be  called  upon  to  relieve  general  embarrassment 
by  proper  intervention. 

It  is,  therefore,  a  matter  of  necessity  to  constantly  con- 
trol the  liquidity  of  the  resources  by  frequent  general 
inventories  (Generaldispositioneri) — as  is  done,  for  instance, 
with  the  greatest  care,  and  at  short  intervals  by  the  Ger- 
man ''great  banks" — in  addition  to  the  daily  cash  inven- 
tories (Kassendis position)  ,15  further,  to  increase  the 
amount  of  the  quick  assets  by  a  proper  composition  of 
the  security  and  bill  holdings;  to  strengthen  both  the 
visible  and  invisible  reserves;  and  to  regulate  with  the 
greatest  vigilance  the  extent  of  the  obligations,  as  well  as 
their  proportion  to  the  liquid  resources. 

It  may  well  be  said  that,  on  the  whole,  the  German 
banks,  or  at  least  the  greater  part  of  them,  and  more 
especially  the  " great  banks"  have  accomplished  and  are 
accomplishing  a  good  deal  in  this  respect.  In  this  way 
the  objections  which  are  continually  urged  against  the 
inclusion  of  the  deposit  business  in  our  banks'  spheres  of 
activity  are  most  effectively  refuted,  or  reduced  to  narrow 
limits.  For  there  can  hardly  be  any  question  of  'dan- 
ger" when  the  deposits,  and  the  other  obligations  due  at 
short  notice  are  balanced  by  more  than  ample  security  in 
the  shape  of  the  quickest  assets,  and  if,  in  addition,  special 
caution  is  exercised  in  the  selection  of  the  securities  owned 
by  the  bank,  as  was  the  case  with  the  Deutsche  Bank, 
which  on  the  last  day  of  its  fiscal  year  (December  31, 


The     German     Great    Banks 

1908)  held  among  its  assets  some  40,900,000  marks  of 
securities,  acceptable  for  investment  in  trust  funds. 

We  shall  have  to  go  into  this  question  later  on  in  a  more 
detailed  manner.16 

(b)    THE    TASKS    OF    BANKS  JDURING    CRITICAL    TIMES. 

If  the  sphere  of  activity  of  the  banks,  of  which  natu- 
rally only  the  most  important  features  have  been  barely 
outlined,  is  exceedingly  extensive  even  during  normal 
times,  necessitating  great  discernment,  caution,  knowledge, 
and  experience,  it  follows  that  the  extent  and  difficulty  of 
such  tasks  becomes  considerably  augmented  during  and 
after  those  economic  crises  which  all  countries  experience 
periodically. 

There  will  probably  never  be  a  permanent  cessation  of 
crises,  any  more  than  there  will  ever  be  permanent  peace. 
However,  just  as  it  is  the  duty  of  diplomats  and  states- 
men constantly  to  reduce  the  possibility  and  probability 
of  wars  by  the  prudent  removal,  prevention,  or  mitiga- 
tion of  all  disturbances  of  the  political  equilibrium,  so  it 
is  the  duty  of  the  directors  of  the  great  banks  to  prevent 
in  an  ever-increasing  degree  the  breaking  out  of  crises, 
to  guard  against  a  disturbance  of  the  economic  equilib- 
rium as  much  as  can  be  done  by  external  influence, 
and  by  a  cautious  and  preventive  business  policy  in  all 
the  above-mentioned  spheres  of  activity. 

This  implies  to  a  continuously  increasing  degree  an 
accurate  knowledge  of  the  internal  conditions  of  indus- 
try, commerce  and  the  exchanges,  also  of  the  financial 
and  commodity  markets,  and  the  general  international 
situation. 


National    Monetary     Commission 

This  duty  entails  above  all  a  keen  perception  of  those 
symptoms  which,  like  storm-petrels  flying  before  the 
storm,  act  as  signals  to  the  experienced  observer. 

Science,  in  modern  times,  with  the  aid  of  particularly 
delicate  instruments,  has  been  able  to  record  earthquakes, 
and  with  accurate  knowledge  of  the  factors  determinative 
of  a  change  of  weather  (as  contained  in  the  reports  of 
meteorological  stations)  to  predict  storms  and  give  timely 
warning  to  those  concerned. 

Similarly,  undeterred  by  the  course  of  contemporary 
events,  experienced  observers,  with  the  help  of  modern 
scientific  resources,  and  knowledge  gained  from  former 
crises,  ought  to  be  able  to  read  disturbances  of  equilib- 
rium as  from  an  economic  seismograph,  and  thus  predict 
the  approach  of  crises. 

The  study  of  the  history  of  crises  17  shows  in  the  most 
striking  manner  that,  provided  the  same  causes  exist, 
the  effects  are  as  similar  as  if  one  crisis  had  "  copied " 
its  predecessor,  as  a  schoolboy  copies  his  neighbor's 
essay,  or  as  a  legislator  frequently  copies  the  draft  of  his 
fellow-legislator's  bill.  Crises  may  be  defined  as  lengthy 
and  serious  disturbances  of  the  bases  of  either  the  pro- 
duction, supply,  or  market  systems,  of  the  payment  and 
credit  systems,  or  of  the  mutual  relations  of  these  systems. 

From  the  history  of  crises,18  the  knowledge  of  which  I 
regard  as  indispensable  to  every  director  of  a  bank,  it  can 
be  established  with  certainty  that  almost  without  excep- 
tion every  crisis  (stock  exchange,  credit,  commercial,  pro- 
duction crisis,  etc.)  is  preceded  by  a  more  or  less  rapid 
rise  of  the  rates  for  short-time  credit,  i.  e.,  of  the  discount 
rates. 


16 


The     German     Great    Banks 

It  will  also  be  noticed  that  the  cause  of  such  a  rise  in 
the  discount  rate  is  almost  invariably  an  increase  in  the 
demand  for  credit,  a  demand  far  exceeding  the  available 
resources,  which,  wherever  a  central  state  note  bank 
exists,  finds  expression  in  a  great  increase  in  the  demands 
made  on  its  funds. 

The  banks,  by  virtue  of  their  accurate  knowledge  of 
stock  exchange  conditions,  of  market  quotations,  of 
"reports"  and  "deports,"  and  of  the  rates  for  daily 
and  ultimo  money,  are  best  qualified  to  answer  the  ques- 
tion whether  such  an  increase  in  the  demand  for  credit 
is  accompanied  by  a  corresponding  increase  in  stock- 
exchange  speculation.  They  are  also  able  to  draw  fairly 
accurate  conclusions,  from  the  extent  and  kind  of  bill, 
acceptance  and  current  account  credit  required  by  their 
customers,  as  well  as  from  the  volume  of  their  report 
and  collateral  accounts,  as  to  the  existence,  or  the  ap- 
proach, of  such  excessive  speculation  as  is  likely  to  cause 
the  outbreak  of  a  crisis  on  the  exchange.  The  greater 
their  clientele  the  more  reliable  are  such  conclusions. 

The  approach  of  an  industrial  or  a  commercial  crisis 
can  be  perceived  or  inferred  not  only  from  general  eco- 
nomic conditions,  but  also  from  a  series  of  phenomena 
which  take  place  in  the  field  of  bank  transactions.  The 
imminence  of  such  crises  can  be  inferred  from  the  rapid 
growth  of  the  claims  made  on  the  credit  of  the  central 
note  bank,  and  in  view  of  the  growing  intimacy  between 
industry  and  the  banking  world,  from  a  series  of  occur- 
rences that  become  reflected  in  the  internal  bank  man- 
agement, as  well  as  in  the  impaired  liquidity  of  the 
bank's  assets  and  the  decrease  of  available  cash  resources. 


90311°— ii- 


National    Monetary     Commission 

These  symptoms  need  not  manifest  themselves  in  their 
entirety  nor  simultaneously.  Some  of  these  occurrences 
are:  The  increased  credit  demands,  growing  by  leaps  and 
bounds  and  becoming  more  striking  each  day,  and  the  ex- 
cessive, and  finally  complete  withdrawals  of  existing  cash 
deposits.  Further,  the  displacement  of  short-term  credit 
by  long-term  credit;  the  rapid  rise  in  the  number  of  bills 
due  that  have  to  be  extended;  the  constantly  increasing 
offer  of  securities  of  an  inferior  and  unsound  nature  from 
a  banking  standpoint.  Other  signs  (though  they  are  at 
first  not  easily  recognised  as  such)  are  the  demand  by  man- 
ufacturers of  bank  credit,  especially  of  acceptance  credit, 
not  intended  for  current  operating  expenses  but  for  pay- 
ing dividends,  or  for  considerably  augmenting  fixed  capi- 
tal, i.  e.,  extension  of  plant,  new  machines,  premises,  etc.19 
Next,  the  continual  demand  for  advances  without  any 
stated  reasons,  or  for  veiled  purposes;  the  constantly 
growing  delay  in  the  receipt  of  payments  due,  and  of  the 
so-called  "specifications"  in  industry  (which  only  gradually 
become  known  to  the  bankers,  and  seldom  to  their  full 
extent) ;  the  great  and  rapid  changes,  especially  the  sud- 
den rise  of  prices  of  raw  materials  and  manufactures; 
finally,  a  superabundance  of  promotions,  conversions,  and 
flotations,  and  the  wholesale  establishment  of  subsidiary, 
affiliated,  and  trust  companies. 

Although  Helfferich20  has  proved  (I  venture  to  say  with 
mathematical  exactness),  that  in  most  cases  (especially 
as  regards  the  last  German  crisis)  the  amount  of  the  gold 
production,  gold  imports  and  exports,  never  had  the  im- 
portance which  Sombart  ascribed  to  them;  still,  like  the 
fluctuations  of  the  rates  of  exchange  and  discount  (bank 

18 


The     German     Great    Banks 

and  private  discount),  these  factors  should  also  be  care- 
fully watched. 

Finally,  important  aids  have  recently  been  made  avail- 
able which  in  a  characteristic  manner — though  with  some 
limitations — help  to  diagnose  the  approach  of  industrial  or 
commercial  crises.  I  have  in  mind  the  valuable  reports 
first  published  in  Germany  by  J.  Jastrow,  the  editor  of 
the  Arbeitsmarkt  and  later  continued  in  the  Official 
Labor  Gazette  (Reichsarbeitsblatt).  These  reports  give 
data  regarding  the  labor  market,  especially  the  demand 
and  supply  at  the  public  labor  exchanges  and  the  extent 
of  unemployment.  It  was  these  reports  I  had  in  mind 
when  I  referred  above  to  modern  scientific  auxiliaries.21 

Laxity  in  the  observation  and  appreciation  of  such 
causes,  especially  if  produced  by  ignorance  of  former 
crises  at  home  and  abroad,  is  one  of  the  gravest  and  most 
fatal  mistakes  of  which  bankers  can  be  guilty.  It  is  the 
less  excusable  the  larger  the  power  and  the  capital  of  the 
bank,  the  wider  the  field  of  economic  observation  and  the 
greater  the  influence  which  may  be  exercised  by  means 
of  a  prudent  business  policy. 

A  deficiency  in  this  respect  prevents  the  bank  manage- 
ment from  taking  measures  at  the  proper  time,  i.  e.,  before 
the  outbreak  of  the  crisis,  and  thus  if  not  preventing  a 
crisis,  at  least  mitigating  its  severity.  The  extent,  nature, 
and  opportuneness  of  such  measures  above  all  serve  as  a 
reliable  gauge  of  the  efficiency,  prudence,  and  foresight  of 
a  bank  management. 

For,  during  a  crisis,  it  is  difficult,  often  impossible,  to 
pursue  a  restrictive  business  policy,  to  collect  outstanding 
debts,  to  call  in  credits,  to  decline  to  discount  bills  and 


National     Monetary     Commission 

acceptances;  indeed  such  a  policy  is  generally  a  serious 
mistake,  likely  to  cause  an  increase  of  the  extent  and 
intensity  of  the  crisis,  for  it  may  give  rise  to  the  disastrous 
notion  that  money  and  credit  are  not  merely  dear,  but  are 
not  to  be  had  at  all.22  What  is  required  is  a  preventive 
policy,  a  cautious  intervention  before  the  outbreak  of  the 
crisis.  To  do  this  it  is  necessary  to  give  opportune  warn- 
ings against  drawing  bills,  increasing  engagements,  and 
credit;  to  make  seasonable  reference  to  the  above- 
mentioned  indications  of  the  probable  approach  of  a  crisis, 
while  making  provision  at  the  same  time  for  a  slow  and 
prudent  though  consistent  increase  in  the  liquidity  of 
the  bank's  resources.  Provided  this  is  done,  the  bank 
can  not  only  await  quietly  all  dangers,  but  is  also  able 
to  offer  support  and  aid  in  the  form  of  discreet  help,  or 
energetic  and  conspicuous  intervention  in  order  to 
prevent  or  at  least  lessen  and  mitigate  the  collapse  of 
otherwise  sound  undertakings,  temporary  embarrassments 
of  clients,  and  serious  disturbances  of  the  market. 

In  this  manner,  the  suddenness  of  the  outbreak,  as  well 
as  the  extent,  duration,  and  seriousness  of  a  crisis  are 
reduced.  A  further  effect  of  such  a  policy  is  that  the 
crisis  is  not  followed  by  a  period  of  lingering  and  latent 
depression,  which  is  frequently  worse  than  the  crisis  itself, 
and  which  renders  recovery,  i.  e.,  return  to  normal  condi- 
tions, much  more  difficult.  It  must  be  acknowledged,  how- 
ever, that  for  persons  standing  in  the  midst  of  business  and 
practical  life,  and  who  are  frequently  confronted  by  occur- 
rences of  a  contradictory  nature,  or  difficult  to  fathom,  it 
is  far  more  difficult  to  perceive  the  approach  of  a  crisis, 
than  for  critics,  who  ex  post,  or  after  the  outbreak,  can 


The     German     Great    Banks 

easily  review  circumstances  and  symptoms  that  have  then 
become  clear  and  connected. 

BAs  a  general  rule,  however,  threatening  signs  such  as 
are  described  above  (p.  17)  as  almost  regular  harbingers  of 
a  crisis,  ought  to  be  correctly  diagnosed  whenever  they 
occur  not  singly,  but  as  connected  or  mutually  comple- 
mentary symptoms  of  a  serious  affection  of  the  body 
economic. 

•  It  is  a  nobile  officium,  especially  of  the  great  banks,  to 
intervene  after  the  outbreak  of  a  crisis,  not  only  where 
their  own  clients  or  interests  are  concerned,  to  lend  their 
support,  attempt  reconstruction  and  thus  to  prevent  or 
at  least  remedy  a  serious  disturbance  of  the  market  by 
conspicuous  and  therefore  especially  efficacious  action. 

It  will  always  redound  to  the  credit  of  the  great  Berlin 
banks  and  bankers  that  through  their  intervention  imme- 
diately after  the  collapse  of  the  Preussische  Hypotheken- 
Aktienbank,  of  the  Deutsche  Grundschuldbank  and  of 
the  Pommersche  Hypotheken-Aktienbank,  they  prevented 
(with  almost  immediate  and  favorable  effect)  the  absolute 
demoralization  of  the  entire  mortgage  bond  market,  and 
that  through  the  reorganization  of  these  concerns23  they 
reduced  to  a  minimum  the  losses  sustained  in  wide  cir- 
cles on  account  of  the  securities  issued  by  these  establish- 
ments. 24  The  same  applies  to  their  intervention  during 
the  catastrophe  in  Saxony. 

(c)  THE  TASKS  OF  THE  BANKS  IN  TIME  OF  WAR  AND  IN 

PREPARING   FOR   WAR    (FINANCIAL   READINESS    FOR   WAR 
AND   FINANCIAL   CONDUCT   OF   WAR).25 

Banks  have  also  to  make  timely  provision  (as  far  as 
possible)  in  times  of  peace  for  the  eventuality  of  war. 


National    Monetary     Commission 

The  marshaling  of  financial  forces  must  correspond  to 
that  of  military  forces,  and  just  as  military  mobilisation 
is  made  possible  by  careful  plans  made  in  times  of  peace, 
so  too  the  marshalling  of  financial  forces  should  be  facili- 
tated by  schemes  likewise  devised  in  times  of  peace. 
Weaknesses  and  gaps  in  the  financial  mobilisation  may 
be  paid  for  as  dearly  as  mistakes  in  the  tactical  deploying 
of  forces,  for  to  both  applies  what  I  have  said  elsewhere, 
"that  it  is  impossible  without  severe  losses  to  evolve  a 
battle  formation  in  the  face  of  the  enemy." 

The  most  important  preparation  for  financial  mobilisa- 
tion consists  in  fashioning  the  credit  system  in  such  an 
elastic  manner  that  in  case  of  war  it  can  cope  with  the 
agitated  and  suddenly  increasing  calls  for  credit. 

To  meet  this  contingency,  reserves  must  be  created  in 
time  of  peace :  reserves  of  considerable  extent  which  can  be 
realised  rapidly,  i.  e.,  mobilised.  These  must  include  on 
the  one  hand  a  considerable  amount  of  domestic  first- 
class  securities,  especially  government  and  municipal 
bonds,  which  in  war  times  can  be  pledged,  if  necessary  or 
desired,  at  the  "war  lombard  offices"  (Kriegs-Lombard- 
Kasseri).™  On  the  other  hand,  they  must  include  foreign 
Gold-valuten,  i.  e.,  bills  and  other  claims  receivable  abroad 
in  gold,  and  prime  foreign  gold  securities  negotiable  on 
various  foreign  bourses,  consequently  possessing  an  inter- 
national market.27  Through  the  realisation  of  these  gold 
equivalents,  and  by  calling  in  outstanding  debts  from 
abroad,  i.  e.,  by  utilising  these  reserves  (the  value  of 
which  in  such  cases  will  be  comprehended  by  the  veriest 
layman),  a  panic  will  usually  be  averted. 


22 


The     German     Great    Banks 


The  enemy,  however,  may  endeavor  to  aggravate  a 
panic  of  this  description  by  the  sudden  collection  of  out- 
standing claims,  by  an  unlimited  sale  of  our  home  securi- 
ties, and  by  other  attempts  to  deprive  Germany  of  gold. 
Attempts  may  also  be  made  to  dislocate  our  capital,  bill, 
and  security  markets,  and  to  menace  the  basis  of  our  sys- 
tem of  credit  and  payments.  Such  a  panic  might  easily 
occur  during  the  first  few  days  after  the  declaration  of 
war  if  the  impetuous  demand  for  ready  cash  and  cash 
reserves  (Angstreserven)  28  is  not  amply  and  imme- 
diately satisfied.  The  latter  demand  often  leads  to  pre- 
cipitate withdrawals  of  giro  and  current  account  balances 
and  of  deposits,  to  the  recall  of  credit,  and  to  the  precipi- 
tate sales  of  merchandise  and  securities. 

Accordingly,  the  banks  must  endeavor  to  terminate 
such  conditions  as  rapidly  as  possible,  as  well  as  to  stem 
the  feverish  demand  for,  and  the  collection  of  ready 
money  from  all  depositories,  and  places  of  hoarding  and 
storing,  so  that  normal  conditions  are  reestablished,  under 
which  all  the  expedients  and  substitutes  obviating  the  use 
of  cash  will  once  more  assume  their  normal  importance  for 
circulating  purposes. 

Above  all,  the  business  policy  described  above  (p.  20) 
as  indispensable  during  a  crisis,  must  be  pursued  in  times 
of  tension  and  agitation,  which  generally  precede  a  war 
long  before  its  outbreak.  Among  others,  restrictive  meas- 
ures, such  as  the  withdrawal  of  credit,  the  refusal  to  accept 
bills,  or  to  discount  customers'  bills,  must  be  avoided.  In 
the  next  place,  interventions  should  be  made  in  the  mar- 
ket, and  all  means  used  for  the  gradual  restoring  of  public 
confidence  in  the  solid  groundwork  of  our  finance  and 


National    Monetary     Commission 

credit  systems.  It  is  such  confidence  which  underlies  not 
only  the  acceptance  of  all  cash  substitutes  (Geldsurrogate) , 
which  abound  to  a  far  greater  degree  than  ready  money, 
but  also  the  determination  to  fulfil  all  pending  engage- 
ments, or  at  least  to  terminate  them  slowly  and  cautiously, 
as  well  as  the  resolution  not  to  withdraw  deposits,  nor  to 
flood  the  market  with  securities  at  extremely  low  rates,  &c. 

The  "great  banks"  should  cooperate  in  all  these  direc- 
tions, not  only  by  word  or  through  influencing  their  clients, 
but  by  their  own  example,  especially  by  exercising  the 
greatest  reserve  in  withdrawing  their  credit  balances  from 
the  Reichsbank,  and  in  presenting  bills  for  re-discounting. 

Besides  this,  they  should  aid  those  ''financial  precau- 
tionary measures"  which  come  within  their  sphere  of 
activity — i.  e.,  those  measures  which  may  be  undertaken 
after  the  declaration  of  war  in  order  to  ease  the  market 
and  credit  demand  and  to  maintain  our  gold  standard, 
and  the  circulation  of  our  bank  notes.29 

In  Germany,  as  I  have  endeavoured  to  prove  elsewhere,30 
these  tasks  would  be  facilitated  to  some  extent  during  the 
critical  weeks  immediately  following  a  declaration  of  war 
by  the  amount  of  bullion  likely  to  be  at  our  disposal,  which 
includes  the  "war  treasure"  of  120,000,000  marks  in  the 
Julius  tower31  at  Spandau  (this  latter,  however,  would 
not  go  far) ;  and  by  the  further  fact  that  the  expenses  of 
mobilisation,32  as  far  as  can  be  judged  to-day,  could  be 
covered  by  the  issue  of  bank  notes.33  Another  gratify- 
ing consequence  would  be  that  during  this  particularly 
critical  time  the  Government  would  not  have  to  apply  to 
the  Reichsbank  with  extensive  demands  for  cash;  and 
further,  that  in  so  far  as  the  State  did  not  prefer  to  meet 


The     German     Great    Banks 

its  requirements  by  additional  taxes,34  it  could  await  a 
calmer  and  more  favorable  condition  of  the  money  market 
for  contracting  loans  to  defray  the  cost  of  war.35 

The  most  important  consequence  of  this  fact  is,  that  in 
negotiating  such  loans,36  the  cooperation  and  good  offices 
of  the  "  great  banks  "  and  great  banking  establishments  can 
be  counted  on  to  a  far  greater  degree,  and  with  much  more 
certainty  than  if  the  negotiations  took  place  during  the 
days  immediately  following  the  declaration  of  war,  when 
the  resources  of  the  banks  would  be  taxed  to  an  extraordi- 
nary extent. 

It  is  impossible  for  the  Reichsbank  in  Germany  to 
execute  smoothly  and  successfully  its  numerous  and  diffi- 
cult tasks  in  war  time  without  the  assistance  of  the  great 
banks  which  form  such  an  important  factor  in  the  whole 
economic  organisation  of  the  country.  The  latter,  how- 
ever, must  prepare  in  times  of  peace  in  the  manner  de- 
scribed above,  if  they  are  to  render  effective  support  during 
war  time.  On  the  other  hand,  it  would  be  preposterous 
to  demand  of  them  complete  "  readiness  for  war,"  such  as 
would  exclude  or  paralyse  the  banks'  capacities  for  doing 
their  customary  business.37 

During  the  stages  of  deliberation  by  the  administration 
of  the  imperial  treasury  and  the  Reichsbank  concerning 
the  adoption  of  the  sometimes  extremely  complicated 
financial  measures  for  the  maintenance  of  the  German 
currency  and  credit  systems,  as  well  as  for  affording  relief 
to  the  market,  and  facilitating  money  and  credit  transac- 
tions during  war  times,38  the  directors  of  the  great  banks 
and  banking  houses  by  reason  of  their  practical  experi- 
ence, their  intimate  acquaintance  with  the  situation  and 
the  receptive  capacity  of  the  money  market,  particularly 


National    Monetary     Commission 

by  reason  of  their  exact  knowledge  of  the  requirements 
and  capabilities  of  their  clientele,  should  be  amongst  the 
first  called  upon  to  serve  as  a  ''financial  general-staff"  to 
the  imperial  treasury  and  the  Reichsbank. 

The  above  presents  a  broad  outline  at  least  of  the  most 
essential  of  the  many  and  gradually  increasing  duties  per- 
formed with  untiring  perseverance  by  the  German  banks.39 
In  order  to  appreciate  their  achievements,  it  should  be 
borne  in  mind  that  during  the  first  period  (1848-1870) 
their  work  and  progress  was  greatly  hampered  by  crises 
and  European  wars,  by  German  political  impotence  and 
lack  of  unity,  by  our  lack  of  capital,  and  the  medley  of 
German  monetary  and  coinage  conditions  of  those  years. 

I  shall  now  proceed  to  outline  the  growth  of  these 
duties  during  the  two  epochs  of  general  economic  devel- 
opment, and  the  development  of  the  German  banks  (with 
particular  reference  to  the  great  banks).  These  two 
clearly  marked  epochs  extend  from  the  middle  of  the 
nineteenth  century  to  1870,  and  from  that  year  to  the 
present  day. 

As  far  as  is  possible  without  effacing  or  obscuring  the 
picture  of  the  general  course  of  development  of  the  Ger- 
man great  banks,  I  shall  endeavor  to  do  what  I  omitted 
in  former  editions  of  this  book,  namely,  to  show  in  what 
manner,  and  with  what  success  each  individual  great  bank 
participated  in  the  common  work.  Indeed,  a  thorough 
and  proper  appreciation  of  the  course  of  development  of 
each  great  bank  will  become  possible  only  after  detailed 
monograph  studies  of  each  of  these  shall  have  been 
published.40 

The  most  important  works  of  reference  used  in  this  book 
will  be  found  in  the  appendix. 


PART  II. 

THE  FIRST  PERIOD  (FROM  THE  MIDDLE  OF  THE 
XIX  CENTURY  TO  THE  YEAR  1870). 

CHAPTER  I. — SKETCH  OF  THE   ECONOMIC  CONDITIONS  IN 

GERMANY  AT  THE   TIME   OF  THE  ESTABLISHMENT  OF 

THE  OLDEST  EXISTING  CREDIT  BANKS. 

In  1848 — the  beginning  of  the  period  about  to  be  dis- 
cussed— about  200  years  had  passed  since  the  end  of  the 
Thirty  Years'  War  (1618-1648). 

Even  then,  however,  Germany,  which  in  consequence 
of  her  geographical  position  from  remote  ages  presented  a 
favorite  battlefield  for  the  whole  of  Europe,  had  not  yet 
completely  recovered  from  the  thorough  spoliation  and 
devastation  she  had  undergone. 

A  re-establishment  of  her  completely  ruined  trade  and 
of  her  shattered  fortunes  was  impossible  during  the 
period  from  1648  to  1815,  owing  to  a  series  of  European 
wars.  These  were  in  particular  the  campaigns  of  Louis 
XIV,  the  Spanish  War  of  Succession,  the  Seven  Years' 
War,  and  the  struggles  against  Napoleon.  Those  wars  and 
campaigns  were  once  more  fought  on  German  soil  by  pow- 
erful enemies,  who  like  Louis  XIV  seized  parts  of  the  coun- 
try (for  instance,  Strassburg,  1681),  and  devastated  anew 
other  parts,  such  as  the  Palatinate  and  other  Rhenish 
countries.  During  the  latter  years  of  that  period  (1806- 
1815),  the  wars  carried  on  with  changing  fortune  against 
Napoleon  I,  which  terminated  with  his  dethronement  and 

27 


National    Monetary     Commission 

banishment,  prevented  the  beginning  of  recovery.  It 
was  only  during  the  three  decades  of  undisturbed  peace 
(1815-1848),  which  preceded  the  economic  epoch  about 
to  be  described  (1848^1870),  that  the  German  nation  had 
time  to  recuperate  and  to  engage  in  the  first  attempts  to 
rehabilitate  trade,  industry,  and  agriculture.1 

Evidently,  it  is  only  possible  to  outline  here  the  main 
points  in  the  economic  conditions  of  Germany  brought 
about  by  this  lengthy  period  of  peace,  and  only  in  as  far 
as  they  bear  on  the  development  and  tasks  of  German 
banking. 

The  population  of  Germany  numbered  at  that  time 
about  35,000,000,  and  was  not  more  than  that  of  France 
(34,500,000).  Of  capital  there  was  but  little;  it  was 
estimated  that  in  Prussia  there  were  720  marks  per  head 
of  the  population,  whereas  the  amount  for  England  was 
2,860  marks,  according  to  an  estimate  made  almost 
simultaneously  (i845).2  At  that  period  England  had 
almost  completed  her  transition  to  a  great  industrial  and 
manufacturing  country,  supplying  more  than  half  of  the 
world's  requirements.  Her  annual  coal  production  at  the 
beginning  of  the  i9th  century  was  about  10,000,000  tons, 
while  that  of  Germany  toward  the  end  of  the  century 
was  little  more  than  120,000,000  tons. 

In  accordance  with  French  example,  serfdom,  as  well  as 
the  hereditary  subjection  of  the  peasants  had  ceased  in  the 
country  during  the  first  half  of  the  iQth  century,  although 
its  abolition  was  slow,  especially  in  the  east  of  Germany, 
where  it  had  been  firmly  rooted  for  centuries.  The  aboli- 
tion of  hereditary  subjection  did  away  not  only  with  the 
obligation  to  furnish  hand  and  team  for  the  benefit  of  the 


The     German     Great    Banks 

landlords,  but — what  proved  of  even  greater  and  increas- 
ing importance — with  the  obligation  on  the  part  of  the 
peasant  to  remain  on  the  estate,  or  in  the  village  belonging 
to  the  same.  In  German  industry,  despite  modest  attempts 
at  reform  undertaken  by  the  legislation  of  the  individual 
states,  the  system  of  guilds  (Zunftwesen)  was  predominant. 
Only  a  few  German  States,  e.  g.,  Prussia  (by  the  laws  of 
1810  and  1811)  and  Nassau,  had  abolished  the  obligation 
of  craftsmen  to  join  guilds,  and  to  obtain  certificates  of 
ability  (Befdhigungsnachweis),  and  had  introduced,  on 
principle,  freedom  of  trade,  an  action  against  which  a 
vigorous  protest  was  launched  by  the  craftsmen's  "par- 
liament" sitting  at  Frankfort-on-the-Main  from  July  15 
to  August  1 8,  1848.  Fairs  continued  to  enjoy  great 
importance  in  some  towns  even  after  1850,  at  least  for  a 
number  of  special  wares.3  Trade  was  confined  mostly  to 
local  markets  and  fairs.  Delivery  trade  by  sample  had, 
however,  started  on  a  small  scale.  But  the  conditions 
for  economic  reform  in  most  of  the  German  States  had 
already  been  created  by  the  establishment  in  1834  °f  the  i 
German  Zolherein.  It  may  be  justly  said,  that  this  1 
great  Prussian  innovation,  which  transformed  the  par- 
ticipant German  States  into  a  unified  economic  area, 
dealt  the  death  blow  to  the  mediaeval  economic  system 
in  Germany.  It  was  only  then  that  a  uniform  economic 
policy  became  possible  in  the*  participating  States,  a 
policy  which  soon  asserted  itself  by  its  urgent  demands 
for  protection  of  new  and  growing  industries  against  the 
overwhelming  economic  superiority  of  England. 

The   average   annual   value   of   the   imports   into   the 
territory  included  in  the  Zollverein  for  the  period  1842- 


National    Monetary     Commission 

1846  has  been  calculated  by  K.  H.  Rau  (Grundsdtze  der 
Volkswirtschaftslehre,  8  ed.,  part  2,  p.  318)  at  210,303,000 
thalers,  or  about  630,000,000  marks,  while  the  exports 
have  been  valued  at  170,089,000  thalers,  or  about 
5ia,ooo,ooo  marks,  which  amounts  should  be  used  only 
with  reservation.  During  the  last  decade  of  that  period 
the  exports  rose  quite  considerably.  Industry  was  still 
mainly  of  the  so-called  domestic  type,  and  principally 
carried  on  in  the  country.  This  applies  particularly  to 
the  manufacture  of  textiles  (spinning  and  weaving).4  In 
the  country  it  was  still  customary  to  manufacture  at 
home  nearly  all  the  personal  requirements  in  the  shape  of 
clothing,  linen,  and  other  textile  goods.  Almost  the  whole 
of  the  German  industry  seemed  to  center  at  that  time  in  the 
textile  and  mining  industries,  both  of  which  were  chiefly 
carried  on  in  the  country. 5  The  number  of  workmen 6 
employed  in  these  industries  exceeded  by  far  the  com- 
bined number  of  workmen  employed  in  all  other  industries. 
The  total  number  of  workmen  employed  in  the  mining 
and  smelting  industries  within  the  limits  of  the  Zollverein 
(created  on  January  i,  1834)  about  the  middle  of  the 
nineteenth  century  was  60,800. 7  In  Prussia  there  were 
48,659  workmen  employed  in  the  same  industries  (average 
of  the  years  1848-1857),  as  compared  with  101,908  accord- 
ing to  the  trade  census  of  1895.  In  18^  the  number  of 
steam-engines  employed  in  the  industrial  area  comprised 
in  the  German  Zollverein  was  not  quite  500,  whereas 
there  were  over  ^^oooLsteam-engines  at  work  in  England 
about  1 8 10.  According  to  the  Prussian  Statistical  Annual 
(Preussisches  Statistisches  Jahrbuch),8  there  were  in  1852 
only  2,124  steam-engines,  developing  43,051  horse-power, 
employed  in  the  entire  industry  of  Prussia,  of  which  almost 


The     German     Great    Banks 

half  (according  to  number  and  power)  belonged  to  mines 
and  foundries;  machine  factories  occupied  only  the 
fourth  place  in  the  list. 

In  the  Kingdom  of  Saxony  9  the  number  of  steam- 
engines  used  for  industrial  and  agricultural  purposes 
amounted  in  1846  to  197  only,  with  2,446  horse-power.  At 
the  end  of  this  period  (1866),  however,  there  were  already 
about  92,000  motors  (100,000  H.  P.)  in  use  in  Germany, 
whereas  in  1895  the  total  horse-power  of  all  engines  in  use 
was  3,400,000,  of  which  2,000,000  horse-power  was  em- 
ployed in  industry.  In  1840  the  whole  German  freight 
traffic  (with  the  exception  of  ocean,  town,  and  rural 
traffic)  was  calculated  at  about  2,000,000,000  ton -kilo- 
meters, whereas  in  1900  it  was  estimated  at  40,000,000,000 
ton -kilometers,  or  almost  twenty  fold.10 

In  1860  the  whole  of  Germany's  industrial  output 
equalled  only  about  half  that  of  France;  whereas  to-day 
she  ranks  second  to  England  in  Europe,  and  takes  third 
place  in  the  world,  only  the  United  States  and  England 
outranking  her. 

About  the  middle  of  the  nineteenth  century  the  pro- 
portion to  the  total  population  of  industrial  workmen  u 
(including  those  engaged  in  flour  mills  and  all  home  indus- 
tries) amounted  in  Prussia  to  only  2.98  per  cent. 

The  enormous  industrial  growth  that  manifested  itself 
shortly  after  the  establishment  of  the  Zollverein  and . its 
economic  measures  was  due  not  entirely  to  that  organi- 
sation, but  primarily  to  the  construction  of  (private) 
railways,  begun  in  1835  with,  the  line  between  Nuremberg 
and  Furth.  This  led  at  the  outset  to  an  almost  feverish 
activity  in  the  mining,  smelting,  machine,  and  kindred 
industries. 


National    Monetary     Commission 

As  early  as  the  middle  of  the  last  century  there  was 
quite  a  considerable  demand  for  pig  iron,  chiefly  by 
reason  of  the  above-mentioned  construction  of  railways. 
According  to  Oechelhauser12  over  17, 500,000  quintals  (Zent- 
ner)  of  pig  iron  were  used  in  railway  construction  from 
1836  up  to  the  beginning  of  our  period  (1850).  The  home 
consumption,  however,  was  not  met  by  the  home  produc- 
tion. England  had  obtained  a  great  start  in  the  manu- 
facture of  that  material,13  coke  blast  furnaces  having 
been  used  as  early  as  the  eighteenth  century  in  place  of 
the  expensive  charcoal  fuel  almost  universally  in  vogue 
in  Germany  during  the  middle  of  the  nineteenth  century. 
In  the  Siegerland  not  a  single  coke  blast  furnace  existed 
at  the  beginning  of  the  forties ;  the  first  coke  blast  furnace 
in  the  Ruhr  district  was  erected  in  1847;  moreover,  the 
existing  blast  furnaces  were  not  very  efficient.14  In  1847 
the  consumption  of  iron  in  the  region  comprised  within 
the  Zollverein  amounted  to  28  Zollpfund  (=14  kilograms) 
per  head  of  the  mid-year  population  (Bering,  loc.  cit., 
p.  51),  as  compared  with  309.8  pounds  in  1899. 

The  production  of  pig  iron  in  1850  was  less  than  that  of 
France,  and  even  of  Belgium;  it  amounted  to  208,000,000 
kilograms  (1875,  2,029,000,000  kilograms). 

The  output  of  coal  amounted  in  1850  to  5,800,000  tons, 
as  against  109,220,000  tons  in  i9oo.15 

In  the  district  of  Siegen  38,880  tons  of  iron  ore,  valued 
at  124,974  thalers,  were  brought  to  the  surface  in  1850, 
as  compared  with  997,680  tons,  valued  at  11,857,779 
marks,  in  i9oo.16 

In  1858  (according  to  Sering,  loc.  cit.,  p.  82)  of  the  total 
number  of  blast  furnaces  in  Prussia,  56.9  per  cent 


The     German     Great    Banks 

(1,328,429  Zentners)  used  charcoal,  37.2  per  cent 
(1,527,989  Zentners)  coke,  5.9  per  cent  (243,516  Zentners) 
coke  and  charcoal.  Mineral  fuel  (coal)  was  not  used  be- 
fore 1844  except  in  Silesia,  and  even  there  only  in  small 
quantities. 

As  a  result  the  iron  imports  from  Great  Britain  reached 
52  and  55  per  cent  of  the  total  German  consumption  up 
to  the  middle  of  the  last  century.  This  state  of  affairs 
underwent  a  change  only  with  the  rapid  growth  of  the 
use  of  coal  in  Germany,  and  when  the  Zollverein  aban- 
doned its  free- trade  policy  by  the  imposition  in  1844  °f  a 
duty  on  iron,  which  till  then  had  entered  free.  It  is 
due  to  the  energetic  support  of  the  German  credit  banks 
that  before  long  the  following  prophecy,  contained  in  the 
business  report  of  1856  of  the  A.  Schaaffhausen'scher 
Bankverein  (p.  53),  was  fulfilled  to  the  letter: 

"The  iron  and  coal  output  of  Westphalia,  and  the 
Rhineland,  in  the  course  of  a  few  years,  will  not  fall  short 
of  that  of  Belgium;  in  the  more  distant  future  it  will  com- 
pete successfully  in  the  international  market  with  that 
of  England,  provided  one  of  the  most  important  condi- 
tions for  such  competition — namely,  the  construction  of 
cheap  means  of  communication — receives  proper  atten- 
tion." . 

The  following  figures,  giving  the  proportion  of  persons 
engaged  in  industrial  pursuits,  as  compared  with  the 
entire  population,  apply  to  Prussia  for  the  middle  of  last 
century  (1843)  :17 

Per  cent. 

Agricultural  population 60.  84  to  6 1.  34 

Industrial  population 23.  37 

Persons  employed  in  commerce o.  97 

90311°—  ii 4  33 


National    Monetary    Commission 

In  1846  there  was  only  i  person  employed  in  trade  and 
industry  to  every  12.2  inhabitants,  though  in  1850  the  fig- 
ures were  already  i  to  every  8.5  inhabitants.  In  1849  only 
28  per  cent  of  the  entire  population 18  of  Prussia  lived  in 
towns,  and  the  population  of  Berlin  did  not  exceed 
33 1 ,894  19  (exclusive  of  soldiers)  in  1840,  and  not  quite 
500,000  in  1858,  and  gave  employment  to  only  3,000 
workmen  in  1840,  a  number  which  rose,  however,  to 
10,242  in  i856.20  In  1849  there  were  only  15  towns  in 
Prussia  the  population  of  which  exceeded  30,000. 21  Ex- 
cluding Berlin,  the  following  now  important  industrial 
towns  had  the  greatest  number  of  inhabitants : 

Aix-la-Chapelle  (about) 46,  ooo 

Elberfeld  (about) 35,  ooo 

Crefeld  (about) 30,  ooo 

Chemnitz  and  Dtisseldorf  each  (about) 26,  ooo 

Dortmund,  Duisburg,  Essen,  and  Solingen  each  (about) 22 7,  ooo 

With  the  aid  of  foreign  (English)  capital,  gas  lighting 
was  gradually  adopted  23  after  1826  by  the  larger  German 
towns  (first  of  all  by  Hanover  and  Berlin) ;  it  was  only 
after  1859  that  petroleum  became  popular  for  lighting, 
especially  among  the  middle  classes. 

The  construction  of  railways  may  be  said  to  have 
started  on  a  large  scale  only  about  the  middle  of  the  nine- 
teenth century.  From  183^101842  only  railways  of  short 
length  and  of  merely  local  significance  (between  large 
towns)  to  a  total  length  of  87  German  miles  had  been 
constructed.  These  were  the  Nuremberg-Furth  railway 
in  1835;  the  Berlin-Potsdam,  and  the  Braunschweig- 
Wolfenbuttel  railways  in  1838;  the  Leipzig- Dresden  line  in 
1839;  the  I/eipzig-Magdeburg,  the  Munich- Augsburg,  the 
Mannheim-Heidelberg,  and  the  Frankfort-Mainz  lines  in 


34 


The     German     Great    Banks 

1840;  and  in  1841  the  Berlin- Anhalt,  the  Diisseldorf- 
Elberfeld,  and  the  Cologne-Elberf eld  railways.  Up  to  1 855 , 
the  date  when  the  credit  banks  appeared  on  the  scene,  only 
7,800  kilometers  of  railways  had  been  built,  which,  spread 
over  the  twenty  years  from  1835,  meant  only  390  kilometers 
of  new  line  annually.  On  the  other  hand,  inj[&65  > ten  years 
later,  almost  double  the  amount  of  railway  mileage  (13,900 
kilometers)  was  finished,  or  610  kilometers  of  new  line  per 
year,  a  performance  in  which  the  credit  banks  had  taken 
an  active  share.  In  1875, or  ten  years  later,  there  were  no 
less  than  27,981  kilometers  of  railways  in  operation,  again 
a  twofold  increase. 

This  corresponds  to  the  enormous  increase  of  capital 
invested  in  German  railway  construction  during  that 
period.  At  the  beginning  of  the  fifties  the  amount  of  this 
capital  was  stated  as  140,000,000  thalers,  in  addition  to 
206,000,000  thalers  preference  shares,  or  a  total  of  346,- 
000,000  thalers  (1,038,000,000  marks);  somewhat  over 
a  billion  marks.24  At  the  end  of  that  period  (1870)  the 
invested  capital  amounted,  according  to  Engel,  to  over 
4,000,000,000  marks  (4,072,167,621  marks),  in  which  sum 
the  preference  shares  are  included. 

As  far  as  the  means  of  transit  in  Germany  were  con- 
cerned, so-called  "  Chausseegeld,"  or  road  toll,  had  in 
many  cases  to  be  paid  to  the  end  of  the  sixties,  as  a  con- 
tribution toward  highway  construction  and  maintenance. 
In  Frankfort-on-the-Main,  for  instance,  this  toll  was  only 
abolished  on  May  18,  1866.  The  highways  in  Germany 
had  in  1857  a  length  of  only  30,000  kilometers  as  against 
150,000  kilometers  in  1900. 


35 


National    Monetary     Commission 

The  inland  toll-gates  in  the  majority  of  German  States, 
however,  had  already  been  abolished  in  1834-35  by  the 
foundation  of  the  Zollverein.  This  proved  a  great  boon 
in  the  economic  field. 

Equally  beneficial  in  the  legal  field  proved  the  adoption 
in  the  fifties  and  sixties  by  the  various  German  States 
of  uniform  commercial  legislation  in  the  shape  of  the 
Allgemeine  Deutsche  Wechselordnung  and  the  Allgemeines 
Deutsches  Handelsgesetzbuch. 

As  far  as  means  of  transport  were  concerned,  steam- 
navigation  made  a  modest  beginning  on  the  Weser  in  1817 
and  on  the  lower  Rhine  and  Elbe  in  1818.  During  the 
middle  of  the  nineteenth  century,  however,  steam-navi- 
gation made  more  rapid  progress. 

At  the  end  of  the  fifties  Germany  had  no  less  than  1 7 
different  independent  postal  administrations  in  addition 
to  the  Prussian- Austrian  Postverein.25  In  1867  theThurn 
and  Taxis  postal  monopoly  came  to  an  end  by  transfer 
to  Prussia. 

Up  to  1844  fees  for  forwarding  ordinary  letters  within 
the  confines  of  Prussia  went  as  high  as  19  silbergroschen 
(i  silbergroschen  =  -^  thaler,  or  about  2>£  cents).  And  it 
was  considered  great  progress  when  an  agreement  was 
made  in  1850  with  Austria,  whereby  the  cost  of  forward- 
ing letters  weighing  less  than  i  lot  (lot  =  about  half  an 
ounce)  to  the  farthest  of  the  three  zones,  or  over  20  Ger- 
man miles  (i  German  mile  =  7, 420  metres),  was  fixed  at 
3  silbergroschen,  or  9  kreuzer.  It  was  only  as  a  result 
of  this  agreement  that,  at  the  beginning  of  1850,  stamps 
were  introduced  in  Prussia.  Up  to  that  time  the  fee  for 
conveying  letters  had  to  be  paid  in  ready  money  at  the 


The     German     Great    Banks 

post-office.  Even  during  the  forties  the  post-offices  were 
only  opened  on  certain  days  in  the  week.  There  were  no 
postmen,  not  even  in  the  towns,  to  say  nothing  of  the 
country;  so  that  letters  had  to  be  called  for  at  the  post- 
office.  Letter-boxes  were  introduced  for  general  use  only 
after  1850. 

The  slow  development  of  postal  facilities  is  best  illus- 
trated by  a  statement  of  Karl  Lamprecht  (loc.  cit.,  p.  143) 
that  in  Saxony,  the  ''land  of  the  Leipsic  fair,"  the  postal 
regulations  remained  unchanged  between  1713  and  1859. 

In  Great  Britain,  on  the  other  hand,  uniform  penny- 
postage  had  been  introduced  in  1840;  uniform  postage 
was  introduced  in  Austria  in  1861,  and  in  the  North 
German  Federation  only  in  1868. 

The  receipt  of  a  letter,  even  as  late  as  the  middle  of  the 
last  century,  must  have  been  regarded  as  quite  an  event, 
except  by  large  mercantile  firms,  for  there  were  only  1.5 
letters  per  head  of  population  in  Prussia  during  1842, 
and  even  in  1851,  the  beginning  of  the  period  under  con- 
sideration, only  about  3  letters  annually. 

The  telegraph  system26  was  first  opened  for  public  us^ 
in  Prussia  (Aix-la-Chapelle)  in  1843,  in  Bavaria  ana 
Saxony  in  1850,  in  Wurttemberg  and  Baden  in  1851, 
in  Hanover  in  1852,  and  in  Mecklenburg  in  1854. 
"The  charges  of  telegraphing  were  high  and  ill-arranged. 
According  to  the  zone  tariff  of  1858,  which  on  the  face  of 
it  had  already  been  reduced,  it  cost  2  gulden  6  kreuzers  to 
send  20  words  from  Frankfort-on-the-Main  to  Nuremberg, 
or  almost  as  much  as  to  Amsterdam  or  Como  (2  gulden  48 
kreuzers) ;  the  shortest  telegram  to  Bochum  cost  4  gulden 
12  kreuzers,  almost  as  much  as  to  Tilsit  or  Orsova  (4 


37 


National    Monetary     Commission 

gulden  54  kreuzers.) " 27  In  1850  only  35,000  telegrams 
were  sent  in  Prussia,  as  against  1,500,000  in  1865. 

Only  1 02  joint-stock  companies  of  all  kinds,  with  a  total 
capital  of  638,000,000  marks,  or  an  annual  average  of  less 
than  27,000,000  marks,  were  formed  in  Prussia  between 
the  years  1826  and  1850,  that  is  in  twenty-four  years.28 

On  the  other  hand,  during  the  following  nineteen  years, 
the  period  from  1851  to  the  first  half  of  the  year  1870, 
295  joint-stock  companies,  or  almost  three  times  as  many, 
with  a  total  capital  of  about  2,405,000,000  marks,29 
were  formed  in  Prussia,  making  an  annual  average  capi- 
tal of  over  124,000,000  marks,  or  more  than  four  times  as 
much  as  in  the  preceding  period. 

Among  the  German  exchanges  at  the  beginning  of  this 
period,  the  one  at  Frankfort-on-the-Main  was  the  most 
influential  for  state  loans  and  similar  securities,  whereas 
the  Berlin  exchange  took  the  lead  in  railway  securities, 
the  amount  of  which,  however,  was  not  yet  great.30 
|  Sixty-three  securities  were  quoted  on  the  Berlin  Stock 
Exchange  in  1850  as  against  309  in  1870,  and  1,872  in 
1900.  At  Frankfort-on-the-Main  the  first  special  organs 
dealing  with  financial  and  commercial  questions  were  pub- 
lished, viz:  The  Aktiondr,  on  January  i,  1854;  the  Frank- 
furter Geschdftsbericht,  on  July  21,  1856  (which,  on  August 
27,  1856,  became  the  Frankfurter  Zeitung  und  Handels- 
blatt) .  In  the  meantime,  however  (before  the  publication 
of  the  Frankfurter  Geschdftsbericht),  the  Berliner  Boersen- 
zeitung,  with  the  Thursday  supplement,  the  Berliner  Boer  sen- 
Courier,  was  published  on  July  i,  1855,  in  Berlin. 

As  far  as  the  systems  of  coinage,  money,  and  banks  are 
concerned,  the  following  details  may  be  of  interest: 

38 


The     German     Great    Banks 

During  the  whole  of  the  period  under  consideration,  and 
to  theJmaX  adoption  .of  the  common  German  coinage  sys- 
tem in  1870,  no  less  than  7  different  kinds  of  coinage 
existed  in  the  various  German  States,  which,  with  the  ex- 
ception of  that  of  Bremen,  were  all  based  on  the  silver 
standard.  Between  the  South  German  gulden  and  the 
North  German  thaler  standards  a  fixed  ratio  had  been 
established  at  the  general  coinage  conference  in  1838 
(Dresdner  Convention) ,  but  solely  for  purposes  of  calcula- 
tion,31 i.  e.,  no  State  belonging  to  the  convention  was 
obliged  to  admit  the  circulation  of  the  coins  of  any 
other  State  belonging  to  the  convention. 

The  variety  of  the  systems  of  coinage  and  standards 
at  home  and  abroad  was  doubtless  one  of  the  main  rea- 
sons why  bankers,  who  were  called  money  changers  at 
that  time,  in  the  centers  of  trade  and  traffic  at  least, 
formed  a  prosperous  and  well-filled  profession.  At  the 
center  of  money  changing  for  middle  and  south  Germany, 
namely,  the  free  town  of  Frankfort-on-the-Main,  there 
were  109  private  bankers  in  1855,  among  a  total  of  1,131 
firms;  and  toward  the  end  of  the  period  under  discussion 
(1868-69),  J92  private  bankers  out  of  a  total  of  1,829 
firms.32  These  private  bankers,  who  in  numerous  cases 
carried  on  simultaneously  commission  business  or  com- 
mission and  forwarding  business,  formed  a  very  respected 
class,  especially  at  Frankfort-on-the-Main,  a  long  time 
before  the  period  in  question,  having  identified  themselves/ 
with  the  general  existing  commercial  interests.  A  most' 
striking  proof  of  this  is  an  occurrence  which  took  place 
in  1810:  "By  the  order  of  Napoleon  (at  the  time  of  the 
Continental  System)  two  French  officials  in  Frankfort 


39 


National    Monetary     Commission 

confiscated  185  chests  containing  English  goods,  the  prop- 
erty of  Frankfort  merchants,  and  burnt  them  in  front  of 
the  gates  of  the  town.  Upon  this  the  Frankfort  bankers 
refused  to  continue  the  discounting  of  French  bills,  and 
caused  thereby  numerous  failures  in  Strassburg,  Nancy, 
Rheims,  and  other  places." 33  Thereupon  the  Continental 
System  was  soon  repealed  in  Frankfort-on-the-Main. 

What  was  true  of  Frankfort-on-the-Main,  however,  is 
not  applicable  to  other  towns  and  districts.  In  Stuttgart, 
for  instance,  there  were  in  1855  onty  J4  firms  (including 
the  Royal  Court  Bank)  which  claimed  to  belong  to  the 
banking  and  discounting  profession,  and  only  one  each  in 
Heilbronn  and  Ulm.  "  These  were,  however,  partly  carried 
on  in  connection  with  other  occupations,  especially  with 
the  forwarding  business."  The  modest  position  held  by 
these  firms  appears  best  from  the  fact  that  in  the  indus- 
trial census  taken  in  1855  (no  changes  of  importance  took 
place  between  1852  and  1855)  25  banking  firms  are  men- 
tioned employing  only  a  total  number  of  68  assistants.34 

In  the  whole  Kingdom  of  Prussia  (in  the  territory 
before  1866)  the  number  of  persons  employed  in  the 
money  and  credit  business  during  1858  (after  several  years 
of  economic  prosperity),  including  principals  and  assist- 
ants, amounted  only  to  about  1,800  (1,774),  and  these 
were  distributed  among  602  enterprises,  so  that  there 
were  602  principals  and  1,172  assistants,  or  about  two 
assistants  to  each  business. 

Of  these  1,800  persons,  384  were  employed  in  Berlin 
alone.85 

At  the  beginning  of  the  period  under  consideration 
modern  methods  of  payment  and  credit  had  not  yet  devel- 


40 


The     German     Great    Banks 

oped,  and  the  giro  and  current- account  business  was 
"  almost  unknown,"  with  the  exception  of  places  like 
Hamburg,  where  special  conditions  prevailed.  Even  in 
a  large  commercial  center  such  as  Frankfort-on-the-Main, 
at  the  beginning  of  the  fifties,  numerous  porters  with  small 
trucks  laden  with  sacks  and  barrels  of  silver  money  could 
be  seen  moving  about  the  streets  "at  any  hour  in  the 
forenoon."  36  The  discounting  of  bills  was  "seldom  prac- 
ticed"37 in  Germany,  except  in  chief  trade  centers  and 
exchange  towns,  and  a  systematic  fostering  of  the  deposit 
business  was  still  less  in  evidence,  either  at  the  credit 
banks  (p.  73)  or  at  the  note-issuing  banks  existing  at  the 
beginning  of  the  period.  The  amount  of  deposits  at  the 
Prussian  Bank,  for  instance,  totaled  only  about  22,740,000 
thalers  (equal  to  68,220,000  marks)  38  in  1850,  in  spite  of 
the  inflow  of  capital  which  had  taken  place  in  consequence 
of  the  discovery  of  gold  mines  in  California  (1848)  and  in 
Australia  (1851),  and  the  simultaneous  discovery  of  new 
quicksilver  mines  in  Mexico.  In  other  banks  of  issue  the 
deposits  were  for  the  most  part  much  smaller.39 

At  the  same  time,  however,  powerful  factors  (mentioned 
above  on  p.  28)  were  making  for  progress. 

Above  all,  the  era  of  peace  that  had  prevailed  in  Ger- 
many for  an  unprecedented  length  of  time  (1815-1848)  ^y 
had  caused  a  relatively  large  accumulation  of  capital, 
which  was  seeking  profitable  investment. 

As  early  as  1844  the  first  industrial  exhibition  in  the 
Zollverein  area  stimulated  industry  in  numerous  direc- 
tions. The  international  exhibition  in  London  in  1851, 
at  which  the  latest  industrial  progress  and  inventions 
were  shown,  exerted  a  powerful  influence  on  Germany.  A 


National    Monetary     Commission 

few  years  later  (1856)  a  great  revolution  took  place  in  the 
iron  industry  through  the  application  of  Bessemer's  prin- 
ciple of  turning  pig  iron  into  steel 40  without  the  aid  of 
human  power  by  inclosing  the  pig  in  pear-shaped  cham- 
bers (converters)  and  by  conducting  heated  air  through  it 
from  powerful  blast  apparatuses — a  process  adapted  in 
1865  by  Martin  to  ore  containing  small  amounts  of  phos- 
phorus and,  in  1879,  by  Thomas  and  Gilchrist  to  ore  rich 
in  phosphorus. 

In  the  years  1834-1854  aniline  colors  were  invented, 
and  in  1868  alizarine  colors. 

In  1840,  lyiebig  published  his  manual  on  chemistry  and 
its  use  in  agriculture,  which  laid  the  foundation  of  modern 
agriculture.  From  1831-1840  to  1871-1880  constant 
progress,  with  few  interruptions,  was  experienced  in 
agriculture.  In  the  old  Prussian  provinces  during  this 
period,  the  price  of  rye  rose  69  per  cent,  that  of  wheat  60 
per  cent,  and  of  barley  90  per  cent;  the  selling  price  of 
land  not  less  than  200-300  per  cent;  the  rents  of  the 
Prussian  domains  increased  from  4,500,000  marks,  or  13.9 
marks  per  hectare  (i  hectare  =  2. 471  acres),  in  1849,  to 
10,200,000  marks,  or  35.6  marks  per  hectare,  or  an 
increase  of  1 56  per  cent.  These  rises  were  frequently  out 
of  proportion  with  the  increases  in  the  prices  of  agricul- 
tural products  and  in  the  productiveness  of  the  area  used 
for  agricultural  purposes,41 

As  stated  before,  various  industries,  such  as  cotton 
spinning,  at  the  beginning  of  this  period  introduced  manu- 
facturing on  a  large  scale  (production  on  a  large  scale  had 
commenced  in  the  mining  industry  many  years  before). 
The  large  industries  were,  however,  unable  to  attain  a 


The     German     Great    Banks 

dominant  part  in  the  whole  of  industry,  in  which  home 
production  still  played  a  leading  part.  In  the  last  decade 
of  this  period  we  can  also  perceive  a  tendency  toward 
increasing  the  exports  of  industrial  products  the  rapid 
development  of  which  in  the  second  period  gradually 
caused  a  complete  transformation  in  the  character  of  the 
whole  German  economic  organization. 

Hand  in  hand  with  the  large  increase  of  population, 
a  serious  transformation  deeply  affecting  the  whole  of 
agriculture  (which  at  this  period  was  at  the  height  of 
prosperity)  had  been  gradually  developing,  which  led  to  a 
considerable  portion  of  the  country's  agricultural  require- 
ments being  met  by  foreign  imports;  whereas  at  the 
beginning  of  this  period,  the  exports  of  important  Ger- 
man agricultural  products,  with  the  exception  of  rye, 
considerably  exceeded  the  imports.42  (As  early  as  1860, 
the  imports  of  rye  exceeded  the  exports  by  259,000  tons.43) 

Industry,  particularly  the  mining,  machine  construction, 
and  metal  industries,  etc.,  received  large  orders  owing  to 
the  rapid  increase  of  railway  construction,  and  was  pro- 
tected and  strengthened,  to  some  extent  at  least,  through 
the  measures  taken  by  the  Zollverein  against  foreign 
importations.  The  expansion  of  industry,  however,  and 
with  it  the  growing  transition  to  large-scale  industry 
(Grossbetrieb) ,  became  an  absolute  necessity  for  the  sup- 
port and  employment  of  the  population,  which  showed  its 
greatest  increase  at  the  beginning  of  this  period,  and 
continued  to  grow  in  later  years. 

Between  1816-1845  the  population  had  increased  from 
24,800,000  to  34,400,000  (by  about  9,600,000  or  38.7  per 
cent),  whereas  between  1845-1875  it  had  increased  only 


43 


National     Monetary     Commission 

by  8,300,000,  or  24.1  per  cent,  and  between  1865-1895 
only  31.8  per  cent. 

This  growth,  noticed  in  most  of  the  German  States  up 
to  the  middle  of  the  last  century,  was  almost  entirely  in 
favor  of  the  rural  population,  though  we  must  not  lose 
sight  of  the  fact  that  a  great  many  of  the  industrial  con- 
cerns (as  has  been  already  mentioned),  (p.  30)  were 
situated  in  the  country.  Loud  complaints  were  heard 
almost  everywhere  at  that  time  that  "there  were  too 
many  people  in  the  country,"  and  it  was  frequently  stated 
with  the  greatest  emphasis  that  the  country  was  unable 
to  support  a  population  of  that  number,  and  ways  and 
means  should  be  devised  to  meet  the  new  conditions.44 

As  a  matter  of  fact  the  population  of  the  agricultural 
districts  (especially  those  east  of  the  river  Elbe)  increased 
in  the  period  1816  to  1877  nearly  91  per  cent,  while  that 
of  the  industrial  western  and  southern  parts  of  Germany 
increased  only  somewhat  over  23  per  cent,  whereas  be- 
tween 1871  and  1900  the  proportions  were  exactly  the 
reverse  (26  and  79  per  cent).45 

It  was  under  such  economic  conditions  that  the  first 
German  credit  banks  were  established. 

CHAPTER  II. — THE  GERMAN  BANKS  DURING  THE  FIRST 

PERIOD  (1848-1870). 
I 

It  is  easy  to  realize  at  present  the  exceptionally  strong 
influence  exercised  at  the  beginning  of  this  period  (about 
the  fifties)  by  the  very  great  and  rapid  development  of  the 
German  railway  system,  above  all  on  the  mining  and 
machine  industries.  In  order  to  appreciate  it,  we  need 
only  recall  the  startling  growth  of  the  mining  and  machine 


44 


The     German     Great    Banks 

industries,  occasioned  by  the  rapid  development  of  the 
electrical  industry  during  the  second  period,  although 
quite  different  financial  and  banking  conditions  exist  to- 
day. In  both  cases,  however,  the  immediate  conse- 
quences were  serious  crises  (1857  and  1900),  which  were  L 
brought  on,  however,  in  part  by  other  causes. 

The  mining  and  smelting  industries  were  the  first  to  /  i 
undergo   this   transformation   of    which    we    have    been  i 

/ 

amazed  witnesses.46  It  is  these  industries  which  are 
mainly  responsible  for  the  spread  of  capitalism  and  the 
development  of  large-scale  production,  as  well  as  the 
gradual  and  radical  change  in  the  general  economic  con- 
ditions of  the  country.47  *j|^ 

The  enormous  demands  of  the  newly  constructed  rail- 
ways for  iron,  coal,  sleepers,  locomotives,  cars,  etc.,  could 
not  be  met  even  approximately  by  the  means  at  the  dis-  ? 
posal  of  the  industry  of  those  days.     New  undertakings  of  j 
all  descriptions,  and  the  enlargement  of  existing  ones,  were  'J 
necessary.     Figures  and  requirements,  however,  were  cal- 
culated at  ten  times  the  right  amounts,  as  is  the  wont  of 
reckless  persons  in  agitated  times,  in  whose  minds  the 
prospective  profits  are  sure  to  assume  gigantic  propor- 
tions.    Thus,  at  the  beginning  of  our  epoch,  following  the 
new  railway  enterprises,  there  arose  in  rapid  succession, 
and  in  strange  medley,  a  large  number  of  other  new  joint- 
stock  companies,  especially  in  the  fields  of  mining,  smelt- 
ing-machine  construction,  and  banking. 

The  list  of  German  credit  banks  founded  during  the  first 
eight  years  of  this  period  (1848-1856),  and  which  were 
mostly  provided  with  share  capital  ample  at  least  for  the 
period  in  question,  will  be  found  in  Appendix  II  at  the 


45 


r 


c 


National    Monetary     Commission 

end  of  this  book.    Among  them  the  following  were  promi- 
nent at  that  time,  according  to  the  amount  of  their  capital : 

(1)  1848:  The  A.  Schaaffhausen'scher    Bankuerein   at 
Cologne,  formed  as  the  result  of  the  reorganisation  of  the 
old  banking  firm  of  Abraham  Schaaffhausen  (which  had 
been  seriously  affected  by  the  troubles  in  1848),  with  a 
capital    of    5,187,000    thalers,    or,    in    round    numbers, 
5,200,000    thalers  =  15,600,000    marks,    of    which    about 
3,000,000  (3,199,800)  thalers  was  immediately  issued. 

(2)  1851:    The   Disconto- Gesellschaft   in   Berlin,    which 
started  however  as  a  mere  "credit  partnership"  (Kredit- 
gesellschafi) .     In  1856  it  was  transformed  into  its  present 
shape,   namely,   a  joint  stock  company  en  commandite 
under  the  name  of  the  Direction  der  Disconto  Gesellschaft, 
with  a  capital  of  10,000,000  thalers  =  30,000,000  marks, 
which  was  issued  in  two  instalments  of  5,000,000  thalers 
each. 

(3)  l853:  The  Bank  fur  Handel  und  Industrie,  which 
\  took  up  its  headquarters  at  Darmstadt  because  no  con- 
|  cession  could  be  obtained  at  that  time  for  a  joint-stock 
,  banking  company,  either  in  the  free  town  of  Frankfort-on- 
<  the-Main  or  in  Prussia.     The  nominal  capital  amounted  to 

25,000,000  florins  =  42, 750,000  marks,  of  which,  however, 
only  10,000,000  florins  =  17,100,000  marks  was  issued  at 
first;  it  was  only  in  the  year  1856,  when  the  Disconto 
Gesellschaft  was  transformed,  that  the  Darmstadter  Bank 
assumed  the  size  first  contemplated. 

(4)  1856:  The  Mitteldeutsche  Creditbank  at  Meiningen, 
with  a  capital   of  8,000,000  thalers  (24,000,000  marks), 
of  which,  however,  3,000,000  thalers  (9,000,000  marks) 
remained  in  the  portfolio  of  the  bank;   in  reality,  there- 


The     German     Great    Banks 

fore,  the  capital  was  made  up  of  5,000,000  thalers  only, 
divided  into  50,000  shares  of  100  thalers  each;  moreover, 
of  this  amount  1,000,000  thalers  were  redeemed  in  1859. 

(5)  1856:  The  Berliner  Handelsgesellschaft  with  a  share 
capital  of  15,000,000  thalers  (45,000,000  marks),  of  which 
only  a  small  part  was  paid  in  at  first,  namely,  3,740,150 
thaleFs;  of  this  latter  sum  800,000  thalers  (4,000  shares  of 
200  thalers  each)  remained  in  possession  of  the  company. 

In  the  four  years  (1853-1857)  the  paid-up  share  capi- 
tals of  the  railway  companies  newly  formed  in  the  various 
German  States,  which  were  almost  exclusively  in  private 
hands  (see  p.  35),  amounted  to  over  140,000,000  thalers, 
and  that  of  the  joint-stock  banks  (Bankaktiengesell- 
schafteri)  to  over  200,000,000  thalers  (600,000,000  marks). 

Of  259  mining,  foundry,  steamship,  machine-construc- 
tion, sugar,  and  spinning  companies,  etc.,  existing  during 
this  period,  with  a  total  capital  of  over  260,000,000  thalers 
(780,000,000  marks) ,  more  than  half  were  founded  during 
the  four  years  mentioned  above  (i853~i857).48 

During  the  one  year,  1856,  new  joint-stock  companies 
with  a  nominal  capital  of  about  150,000,000  thalers  were 
chartered  in  Prussia  alone. 

In  order,  however,  to  comprehend  properly  the  rush 
that  took  place  just  then,  it  must  be  remembered  that 
during  this  whole  period  (about  twenty  years),  from  1851 
to  the  first  half  of  1870,  only  295  joint-stock  companies, 
with  a  total  capital  of  about  2,405,000,000  (2,404,760,000) 
marks  (see  p.  38),  were  chartered. 

Of  this  total  almost  half,  namely  1,020,000,000  marks 
(340,000,000  thalers),  represented  the  capital  of  the  rail- 
way and  joint-stock  bank  companies  founded  in  Prussia 


47 


National    Monetary     Commission 

during  these  four  years  (1853-1857).  Of  the  total  capital 
of  2,404,760,000  marks  invested  in  Prussia  in  joint-stock 
companies  during  1851-1870  (first  period),  2  250,960,000 
marks  were  invested  as  follows: 

Marks. 

Mines,  foundries,  and  salt  works 275,  410,  ooo 

Banks 94.  650,  ooo 

Insurance  companies i58>  ,46o>  o00 

/     Railways i,  722,  440,  ooo 

so  that  these  four  classes  of  industrial  and  commercial 
undertakings  arjsorbed  92.7  per  cent  of  the  capital  of  all 
joint-stock  companies  founded  in  Prussia  during  the 
period  in  question.49 

During  this  great  process  of  transformation,  which  took 
place  in  the  same  manner  in  all  the  other  German  States 
up  to  1856,  scarcely  any.  other  aid  could  be  called  in  than 
that  of  the  Bank  fur  Handel  und  Industrie,  founded  in 
1853,  which  we  shall  style  in  the  future,  after  its  head- 
quarters and  conforming  to  public  custom,  the  Darm- 
stddter  Bank.  For  the  Disconto  Gesellschaft,  founded 
in  1851,  emerged  from  the  narrow  confines  of  a  "mutual 
credit  partnership"  (auf  Gegenseitigkeit  beruhende  Kredit- 
gesellschaft)  only  after  1856,  while  the  attention  of  the 
A.  Schaaffhausen'scher  Bankverein  was  necessarily  occu- 
pied during  those  years  with  strengthening  the  inner 
affairs  of  the  firm  of  Abraham  Schaaffhausen  which  it  had 
taken  over. 

The  Darmstadter  Bank,  founded  at  the  beginning  of  this 
process  of  transformation,  purposely  assumed  the  title  of 
"  Bank  for  Handel  und  Industrie." 

"  It  is  in  no  way  the  task  of  the  bank,"  it  was  stated  in 
the  first  business  report  for  1853,  "to  pave  the  way  for 
stock- jobbing  operations,  and  to  stimulate  capitalists  to 


The     German     Great    Banks 

unproductive  gambling  on  'change.  On  the  contrary,  the  ^ 
bank  is  expected  to  promote  S9und  and  extensive  under- 
takings by  its  own  participations,  and  by  investing  out- 
siders' funds  intrusted  to  its  care.  By  means  of  its  em- 
inent position  and  clear  insight  into  the  whole  situation 
of  German  industry  it  is  fitted  to  assist  to  the  fullest 
extent  of  its  powers  in  directing  capital  and  the  spirit  of 
enterprise  into  the  channels  corresponding  to  the  require- 
ments of  the  moment.  Its  offices  at  home  and  abroad  are 
intended  to  facilitate  export  and  the  thousand  and  one 
other  relations  between  German  industry  and  the  money 
market.  It  is  the  right  and  the  business  of  the  bank  to 
receive  the  funds  which  some  manufacturers  may  have 
available  for  the  time  being  and  supply  them  to  other 
manufacturers  who  may  require  them.  Through  such  a 
constant  exchange  it  hopes  to  stimulate  and  promote 
industrial  activity.  Aside  from  the  bank's  participation 
in  great  industrial  undertakings,  it  is  likewise  authorized 
to  participate  in  the  great  creations  and  financial  trans- 
actions of  the  governments,  and  to  act  as  intermediary 
in  the  placing  of  securities  of  foreign  governments." 

There  is  no  doubt  that  part  of  this  program,  including 
the  statutory  regulations,50  was  influenced  by  the  organi- 
zation and  aims  of  the  Credit  Mobilier  (Societe  generate 
de  Credit  mobilier)  founded  in  November,  1852,  with  a 
capital  of  60,000,000  francs.  This  is  particularly  true  of 
the  debentures  idea,51  and  the  fixing  of  the  amount  of  the 
capital.  As  a  matter  of  fact  among  the  founders  of  the 
Credit  Mobilier  was  Abraham  Oppenheim,  of  Cologne,  one 
of  the  co-founders  of  the  Darmstadt er  Bank,  while  one  of 


90311°— n 5  49 


National    Monetary     Commission 

the  higher  officials  of  the  Credit  Mobilier  (Hess) ,  was  one 
of  the  first  directors  of  the  Darmstadter  Bank. 

It  may  be  of  interest  to  note  that  the  French  estab- 
lishment alluded  to,  which  was  intended  to  put  the  Saint 
Simon  ideas  into  practice  under  the  direction  of  the 
Pereires,  was  heartily  welcomed  by  the  Government,  as 
well  as  by  the  general  public,  as  an  institution  likely  to 
form  a  counterpoise  to  the  excessive  power  of  the  pri- 
vate bankers,  and  more  especially  of  the  house  of 
Rothschild. 

"The  founding  of  the  Contango  Bank,  or  Credit  Mo- 
bilier," says  an  article52  published  in  Germany  in  1856, 
was  based  on  a  genuine  and  true  principle  belonging 
entirely  to  our  age.  Enormous  capitals  had  accumu- 
lated in  the  hands  of  several  banking  houses  in  different 
towns  in  Europe.  They  dominated  all  business  through 
the  enormous  proportions  of  their  capital.  *  *  *  They 
made  their  own  conditions  as  though  they  held  a  monop- 
oly *  *  *  NO  limits  can  be  discovered  to  these  tend- 
encies. This  monopoly  can  be  broken  only  by  opposing 
large  capital  with  a  still  larger  one,  and  this  can  be  done 
only  by  the  association  of  many  small  capitals.  Thus  on 
November  12,  1852,  the  Credit  Mobilier  Company  was 
founded  with  a  capital  of  60,000,000  francs,  in  120,000 
shares  of  200  francs  each. 

The   French   Government    desired    simultaneously    to 
!  weaken  the  Bourbonist  and  Orleanist  aspirations,  which 
were  supposed  to  be  represented  by  the  house  of  Roth- 
schild, through  the  concession  ofaBanqw  Gouvernementale 
which  among  other  things  was  to  influence  the  quotations 


The     German     Great    Banks 

of  government  stock — of  course  in  an  upward  direction 
only! 

Accordingly  the  Rothschilds  (after  co-operating  in  the 
beginning)  formed  a  very  powerful  syndicate  of  private 
bankers  as  early  as  1855  to  fight  the  Credit  Mobilier.  __  __ 

It  is  principally  the  Credit  Mobilier,  its  organisation,  ~ 
its  unparalleled  growth  and  decline  within  the  short 
period  of  fifteen  years,  that  has  influenced  the  public 
mind  to  such  an  extent  that  German  banks  almost  with- 
out distinction,  and  even  up  to  the  present  day,53  are 
designated  as  Credit  Mobilier  banks.  The  formation  and 
activity  of  that  establishment  form  to  a  great  extent54 
the  subject  of  one  of  the  most  brilliant  French  novels, 
namely,  "L'Argent,"  by  Emile  Zola.  «, 

This  result  was  largely  the  work  of  contemporary  writ- 
ers, who,  impressed  by  the  failure  of  the  Credit  Mobilier, 
naturally  gave  vent  only  to  very  adverse  criticism.55  A 
prominent  place  in  this  field  belongs  to  the  voluminous 
work  by  Ay  card,56  published  during  the  year  of  the  failure 
of  the  Credit  Mobilier  (1867).  This  book,  containing  595 
pages,  which  unfortunately  was  used  and  is  still  used  con- 
stantly as  an  authority,  is  from  beginning  to  end  (and  in 
this  particular  I  quite  agree  with  Plenge57)  nothing  but  a 
pamphlet.  It  is  a  clumsy  work,  overflowing  with  repeti- 
tions and  exaggerations,  which  had  its  origin  in  the  spite 
and  jealousy  of  a  small  banker,  whose  small  power  of  dis- 
cernment prevented  him  from  perceiving  side  by  side  with 
the  undeniable  mistakes  and  faults  of  the  Credit  Mobilier 
the  incontestable  services  which  that  institution  had  ren- 
dered to  the  economic  progress  of  his  country. 


National    Monetary     Commission 

The  Credit  Mobilier,  which,  according  to  the  amount  of 
its  capital  and  the  program  outlined  in  its  reports  and 
in  the  statements  of  its  managing  directors,  was  never 
intended  to  be  solely  a  flotation  bank  (Effektenbank) ,  at  the 
very  outset  fixed  its  aims  far  too  high,  until  they  became 
almost  fantastic.  For  this  program  (although  it  may 
have  been  the  result  of  much  forethought),  was  not  one 
that  could  be  carried  out  with  the  ordinary  means  of  a 
bank,  as  it  purposed  an  economic  transformation  on  a 
grand  scale  of  the  entire  railway,  industrial,  and  credit 
systems. 

Further,  the  Credit  Mobilier  injured  its  own  interests 
to  a  great  extent  (as  was  recognised  when  too  late), 
through  the  distribution  of  excessive  dividends  (1855 
over  40  per  cent) ,  as  well  as  by  persistent  adherence  to  its 
scheme  of  the  issue  of  debentures,  a  matter  generally 
impracticable  within  the  compass  of  any  bank,  and  espe- 
cially of  one  that  had  so  many  aims  in  view.  That 
scheme,  rightly  enough,  was  never  executed  owing  to  the 
opposition  of  the  Government.  Thus  it  was  debarred 
above  all  from  gradually  increasing  its  share  capital58  in 
accordance  with  its  growing  business,  and  from  strength- 
ening its  reserves  in  order  to  attain  the  liquidity  of 
resources  which  is  the  sole  justification  and  qualification 
for  the  pursuit  of  constantly  increasing  tasks. 

It  is  also  true  that  through  its  precipitate  procedure, 
and  through  the  attempt  to  carry  out  simultaneously  all 
parts  of  its  program,  which  in  turn  necessitated  constant 
and  increased  support  of  the  Bourse,  as  well  as  through 
the  flotation  of  a  superabundance  of  new  securities  and 
companies,59  the  Credit  Mobilier  paved  the  way  in  no 


The     German     Great    Banks 

inconsiderable  measure  for  stock  gambling,  agiotage,  and  " 
share  swindling  pure  and  simple.  The  last-mentioned 
effect  was  largely  due  to  the  business  reports,  which  were 
true  paradigms  of  inadmissible  concealments  and  puffing 
advertisements  (justly  denounced,  at  least  in  most  cases, 
by  Aycard,  although  he  does  so  in  endless  repetition), 
which  in  turn  caused  the  shares  of  the  Credit  Mobilier — 
not  without  the  influence  of  the  institution  itself — at  the 
very  outset  to  become  gambling  stock  of  the  very  first 
rank.60 

The  Credit  Mobilier  did  not  foster  the  regular  customer 
business  to  any  extent  worth  mentioning.  The  large 
amount  of  deposits  (up  to  145,000,000  francs),  however, 
that  were  intrusted  to  its  care  by  the  large  railway  com- 
panies which  it  formed,  were  invested  to  a  considerable 
extent  in  other  railway  shares,  and  industrial  securities 
of  all  descriptions,  as  well  as  in  its  numerous  subsidiary 
companies.61 

This  circumstance,  coupled  with  the  enormous  and 
permanent  advances  made  to  these  subsidiary  companies 
(especially  to  the  Societe  Immobiliere  which  it  had 
founded),  led  to  the  complete  immobilization  of  its  share 
capital,  and  thereby  to  the  downfall  of  the  bank,  which 
actually  took  place  in  1867. 

Moreover,  strong  speculation  on  the  part  of  the  bank  62 
itself,  in  the  closest  relation  to  the  enormous  amounts  of  the 
tied-up  securities,  took  place,  which  resulted  occasionally 
in  considerable  gains,  but  frequently  and  probably  in  the 
majority  of  cases,  in  great  losses. 

On  the  other  hand,  however,  it  must  not  be  forgotten^ 
that  it  was  due  above  all  to  the  boldness  and  tenacious  / 


53 


National    Monetary     Commission 

energy  of  the  Pereires  that  the  enormous  extension  of 
French  railways,  and  partly  also  of  foreign  lines,  was 
brought  about63  in  the  period  from  1850  to  i86o,04 
when  the  Pereires  were  acting  independently.  This 
opened  up  new  fields  of  activity  to  French  industry, 
and  gave  it  an  undreamed  of  power,  extension,  and 
organisation. 

In  addition  it  must  be  admitted  in  praise  of  the  Credit 
Mobilier  that,  as  Aycard  himself  is  obliged  to  recognise,  it 
continued^  to  protect  the  enterprises  it  had  founded  and 
the  securities  it  had  issued,  and  that  it  was  just  the  per- 
sistent exaggeration  of  this  principle,  which  in  itself  is  not 
reprehensible,  that  constituted  the  main  though  not  sole 
cause  of  its  downfall. 

This  downfall,  however,  was  not  prevented  by  the  con- 
trol on  the  part  of  the  shareholders,  a  remedy  recom- 
mended as  most  efficient  in  many  quarters,  and  facilitated 
by  the  by-laws  of  the  Credit  Mobilier,  according  to  which 
any  10  members  at  a  general  meeting  by  a  written  appli- 
cation could  place  any  subject  on  the  order  of  the  day. 

Further  (and  this  is  not  less  important) ,  the  downfall 
was  neither  prevented  nor  foreseen  by  the  existing  sub- 
stantial governmental  control.  No  less  important  an 
authority  than  Adolf  Wagner,65  while  under  the  first 
impression  of  the  crisis  of  1900,  thought  it  necessary  to 
propose  for  all  German  Banks  a  "  State  Control  Bureau," 
an  institution  which  in  the  case  of  the  Credit  Mobilier 
had  existed  from  the  very  beginning  in  a  form  which 
partly  met,  and  partly  even  exceeded  the  wishes  of  Adolf 
Wagner.  The  charter,  dated  November  20,  1852,  contains 


54 


The     German     Great    Banks 

the  following  regulations  regarding  the  government  con- 
trol which  was  by  no  means  "an  empty  form:"66 

"ART.  3.  La  societe  sera  tenue  de  remettre,  tons  les  six 
mois,  un  extrait  de  son  etat  de  situation  au  Ministere  de 
I'lnterieur,  de  1' Agriculture  et  du  Commerce,  au  prefet  du 
Departement  de  la  Seine,  au  prefet  de  police,  a  la  chambre 
de  Commerce  et  au  greffe  du  Tribunal  de  commerce  de 
Paris. 

"  ART.  4.  En  outre,  la  Societ6  devra  fournir  au  Ministre 
des  Finances  sur  sa  demande,  ou  a  des  epoques  periodiques 
par  lui  de'terminees,  les  m£mes  etats  presentant  la  situa- 
tion de  ses  comptes  et  de  son  portefeuille,  ainsi  que  le 
mouvement  de  ses  operations. 

"Les  operations  et  la  comptabilite  de  la  Societe  seront 
soumises  a  la  verification  des  de'le'gues  du  Ministre  des 
Finances,  toutes  les  fois  que  celui-ci  le  jugera  convenable. 
II  sera  donne  communication  a  ces  de'legue's  du  registre 
des  deliberations,  ainsi  que  de  tous  les  livres,  souches, 
comptes,  documents  et  pieces  appartenant  a  la  societe. 
L,es  valeurs  de  caisse  et  de  portefeuille  lui  seront  e*gale- 
ment  represent  e*es." 

[ART.  3.  The  Company  shall  transmit  every  six  months 
abstracts  of  its  condition  to  the  Minister  of  the  Interior, 
Agriculture  and  Commerce;  to  the  prefect  of  the  police, 
to  the  Chamber  of  Commerce  and  to  the  file  office  (greffe) 
of  the  Commerce  Court  in  Paris. 

ART.  4.  The  Company  shall  furthermore  furnish  to  the 
Minister  of  Finance,  either  upon  demand  or  at  intervals 
prescribed  by  him,  statements  of  the  condition  of  its 
accounts  and  portfolio,  also  of  the  movement  of  its  opera- 
tions. 


55 


National    Monetary     Commission 

The  operations  and  the  books  of  the  Company  shall  be 
subject  to  examination  by  the  representatives  of  the 
Minister  of  Finance  at  any  time  he  may  deem  proper. 
These  representatives  shall  have  access  to  the  minutes  of 
the  deliberations,  also  to  the  books,  stubs  (souches), 
accounts,  documents  and  other  papers  belonging  to  the 
Company.  They  shall  also  have  power  to  ascertain  the 
value  of  the  cash  and  of  the  portfolio  of  the  Company.  J 

I  trust  that  I  have  given  above,  though  only  in  brief 
form,  everything  essential  to  form  an  opinion  as  to  the 
growth  and  downfall,  the  faults  and  excellencies  of  the 
Credit  Mobilier,  without  having  omitted  any  of  the  im- 
portant points  which  formed  the  bases  of  Battler's 67  and 
Max  Wirth's 68  criticisms.  .  I  shall  now  take  up  the  ques- 
tion whether  and  in  how  far  it  is  correct  to  designate  the 
German  banks  (especially  those  of  the  first  period)  un- 
reservedly as  "Credit  Mobilier"  banks.69  " 
fin  the  first  place,  as  far  as  the  by-laws  are  concerned  on 
which  the  Darmstadter  Bank  (Bank  fur  Handel  und  In- 
dustrie) was  founded,  it  may  be  asserted,  that  taken  as  a 
whole,  i.  e.,  as  regards  the  large  majority  of  its  regulations, 
they  are  copied,  not  from  those  of  the  Credit  Mobilier 
(which  was  founded  the  year  before),  but  consciously,  and 
in  some  cases  literally,  from  the  statutes  of  the  A.  Schaaff- 
hausen'scher  Bankverein,  established  in  1848.  Conse- 
quently, they  rest  essentially  on  a  German,  and  not  on 
a  French  foundation,  and  were  the  product  of  German 
business  customs  and  views. 

This  applies  especially — I  can  only  refer  to  a  few  in- 
stances here — to  the  most  important  part  of  the  pro- 
gram, namely  to  Chapter  III,  in  which  the  "  sphere  of 


v 
l 


The     German     Great    Banks 

activity  and  the  powers  of  the  bank"  (sec.  10) 70  are  gone 
into  minutely,  and  which  is  almost  an  exact  copy  of  the 
corresponding  paragraph  in  the  Schaaffhausen  by-laws 
(sec.  20).  This  is  preceded,  in  the  by-laws  of  both  banks, 
by  the  following  fundamental  principle  of  sound  banking 
policy  (sec.  10,  par.  i  of  the  by-laws  of  the  Darmstadter 
Bank  and  sec.  20  of  the  Schaaffhausen  Bank  by-laws) : 

"The  bank  is  authorised  to  carry  on  all  kinds  of  bank- 
ing business — that  is,  such  business  from  which  it  can 
easily  withdraw  its  money  in  case  of  need." 

The  additional  regulations  of  Chapter  III  of  the  by-laws* 
of  the  Darmstadter  Bank  are  interesting.  They  were 
evidently  made  with  regard  to  the  needs  of  the  times.71  I 
have  pointed  out  above  that  they  were  partly  a  reproduc- 
tion of  the  corresponding  clauses  in  the  Credit  Mobilier's 
program.72  They  were  lacking73  in  the  Schaaffhausen 
Bank  by-laws,  which  had  been  prepared  five  years  earlier, 
and  under  different  economic  conditions.  According  to 
tliese  regulations  the  bank  was  authorised: 

(i)  To  undertake  all  loans,  or  enterprises  of  a  public  ~\ 
nature  on  its  own  account,  or  partly  on  its  own  account, 
to  assign  or  transfer  them,  to  realise  them,  or  to  partici- 
pate in  underwriting  them,  as  well  as  to  put  in  circulation 
bonds  payable  to  names  or  bearer  to  the  limit  of  its  under- 
taking or  participation. 

(k)  To  arrange  for  and  effect  the  union,  or  consolidation    "\ 
of  various  anonymous  companies,  as  well  as  the  transfor-       ] 
mation  of  industrial  undertakings  into  anonymous  com- 
panies.74 

The  programs  of  both  of  these  two  large  banks  belong- 
ing to  the  period  under  consideration75  (the  by-laws  of  the 


57 


National    Monetary     Commission 

Disconto  Company  were,  in  accordance  with  its  origin 
as  a  credit  partnership,  if  anything  more  restricted)  were 
consequently  neither  fantastic,  nor  calculated  to  effect 
revolutionary  changes. 

Naturally  these  pregnant  differences  in  the  by-laws 
and  programs  could  hardly  be  noticed,  far  less  appreciated, 
during  the  fifties.  For|the  situation  of  general  economic 
conditions  was  almost  identical  at  that  time  in  France 
and  Germany,  in  so  far  as  similar  causes  (described  above) 
produced  similar  results  in  both  countries.  In  France, 
as  well  as  in  Germany,  an  impetuous  rushing  forward 
manifested  itself  from  1852-53  in  all  branches  of  industry, 
^specially  in  the  mining  and  machine  industry,  caused 
by  the  great  haste  with  which  railways  were  being  con- 
structed. In  both  countries  a  vast  number  of  promo- 
tions, transformations,  and  flotations  came  to  the  fore 
during  a  very  short  period;  these,  naturally,  required  the 
aid  of  the  newly  founded  banks  which  perceived  in  such 
undertakings  a  rich  source  of  gain.  Added  to  this  (and 
again  as  a  result  of  the  same  causes,  accompanied  by 
the  ever  present  and  apparently  irrepressible  spirit  of 
speculation  in  both  countries),  discount  rates  went  up 
strongly  in  consequence  of  the  excessive  demand  for  cap- 
ital^ y  The  rate  of  discount  of  the  Bank  of  France,  which 
together  with  that  of  the  Bank  of  England,  was  above  all 
determinative  for  Germany  at  that  time,  stood  at  3  per 
cent  as  late  as  1852  (beginning  with  March),  and  that  of 
the  Bank  of  England  at  only  2  per  cent  during  April- 
December,  i852.76 

During  the  year  1853  the  discount  rate  of  the  Bank  of 
England  gradually  rose  to  5  per  cent  between  the  29th 


The     German     Great    Banks 

September  and  the  2ist  December.  In  1855,  between 
autumn  and  the  end  of  December,  it  went  up  to  5^  per 
cent  and  7  per  cent,  after  some  fluctuations  again  to  7 
per  cent  at  the  end  of  1856,  next  to  8  per  cent  beginning 
with  October  19,  1857,  to  9  per  cent  on  November  5,  and 
to  10  per  cent  on  November  9,  1857,  a  sufficiently  sure 
sign  of  an  approaching  storm.  Similar  conditions  pre- 
vailed in  the  Bank  of  France,  while  the  highest  rate 
recorded  by  the  Hamburger  Bank  in  1857  wa$  as  much 
as  12  per  cent.77 

A   commercial   and   bourse   crisis   which   was   greatly -n 
intensified  by  severe  commercial  crises  in  England  and 
the  United  States,  broke  out  in  1857  simultaneously  in  ,  ' 
England,  France,  and  Germany. 

The  situation  in  the  two  last-named  countries  was 
bound  to  develop  into  a  bourse  crisis,  even  without  the 
simultaneous  commercial  crises  in  the  United  States  and 
England,  in  consequence  of  the  excessive  number  of 
company  promotions,  transformations,  and  new  issues,  as 
well  as  through  the  collapse  of  the  normal  organisation 
of  the  credit  and  money  market  produced  thereby.78 

The  course  of  events  on  the  Bourse  was  that  which  has 
been  constantly  recurring.  First  of  all,  professional 
speculators,  upon  learning  at  the  Bourse  of  the  universal 
improvement  in  the  economic  situation,  found  that  the 
improvement  was  not  sufficiently  reflected  in  the  bourse 
quotations,  and  by  heavy  and  continued  purchases, 
endeavored  to  bring  about  a  lasting  rise.  It  was  only 
then,  as  is  generally  the  case,  that  the  general  public, 
for  the  most  part  guided  and  influenced  by  the  quotation 
list,  took  up  the  matter.  Its  opinion,  however,  is  based 


59 


National    Monetary     Commission 

on  slight  practical  knowledge.  During  times  of  a  visible 
rise  of  the  market  its  credulity  is  exceeded  only  by  its 
hopes;  it  accepts  the  existing  exchange  quotations,  how- 
ever high,  as  the  basis  for  calculating  the  intrinsic  value 
of  securities,  while  these  calculations  grow  more  and 
more  fantastic  from  day  to  day. 

As  the  economic  development  and  the  course  on  the 
bourses  of  both  countries  at  that  time  proved  nearly  the 
same,  and  as  the  participation  of  the  banks  of  both  coun- 
tries in  excessive  and  irrational  promotions,  issues,  and 
flotations,  above  all  in  mining  enterprises  and  railway 
building  (which  first  gave  rise  to  the  crisis,)  was  only 
too  obvious,  the  natural  inference  was  drawn,  that  these 
banks  were  identical  in  character  and  kind. 

This  conclusion,  however,  overstepped  the  mark.  It  is 
true  that  the  banks  dating  from  this  period,  endeavored 
from  the  very  commencement  to  vindicate  their  right, 
and  even  duty,  to  promote  commerce  and  industry  in  the 
most  effective  way,  by  participation  in  flotations,  foun- 
dations, and  transformations.  The  Darmstadter  Bank  in 
particular  had  contemplated  from  the  very  outset  the 
creation  of  special  "organs  at  home  and  abroad"79  for 
this  purpose. 

This  bank  accordingly  80  began,  during  the  first  years 
of  its  existence,  to  create  such  "organs"  on  a  large  scale. 
But  it  is  equally  true  that  attempts  to  found  branches  in 
the  various  German  States  were  unsuccessful,  chiefly  be- 
cause of  the  opposition  of  the  different  governments,  which 
gave  home  banks  the  preference  over  the  branch  estab- 
lishments of  outside  institutions.81  Thus  only  an  agency 
could  be  established  in  Frankfort-on-the-Main  in  1854, 


60 


The     German     Great    Banks 

which  existed  until  1864,  when  it  was  replaced  by  a 
branch.  Only  at  Mainz,  in  the  Grand  Duchy  of  Hesse, 
where  the  headquarters  of  the  bank  were  situated,  did  the 
bank  succeed  in  opening  a  branch  establishment  as  early 
as  1854,  while  in  the  same  year  a  silent  partnership 
(Kommandite)  had  been  formed  in  New  York  (G.  von 
Baur  &  Co.),  which,  in  1856  and  1857,  was  followed  by 
the  founding  of  further  commandite  connections  in  Berlin, 
Heilbronn,  Mannheim,  Breslau,  and  Leipsic,  and  in  the 
sixties  also  in  Hamburg,  Stuttgart,  and  Vienna.82 

Accordingly  the  account  "  commandites,  branches  and 
agencies"  stood  in  the  books  of  the  bank  at  8,433,701.43 
florins  as  early  as  1856. 

The  promotion  of  industry,  however,  was  not  the  onlyTf  ,*- 
aim  that  the  banks  had  in  view  at  that  period.  It  had 
been  emphasized  at  the  very  beginning  that  participation 
"in  the  great  creations  and  financial  transactions  of  the 
Governments"  also  formed  an  essential  part  of  their 
program.  This  constituted  a  sphere  of  business  activity 
which  the  Credit  Mobilier  had  constantly  neglected  in 
favor  of  railway  and  industrial  transactions,  except  in  so  -1 
far  as  the  exigencies  of  its  position  as  a  "  banque  gouverne- 
mentale,"  a  position  which  it  aimed  at  and  which  it  was 
intended  to  fill,  necessitated  a  different  attitude.  In 
contrast  to  this  all  German  banks,  (especially  those 
founded  during  the  period  under  consideration,)  fosj 
tered  from  the  very  outset  this  special  branch,  namely!,  I 
public  loan  credit  (state,  provincial,  and  municipal)  > 
and  have  attended  to  this  branch  of  business  effectively 
and  successfully  ever  since. 


61 


National    Monetary     Commission 

In  the  following  list  the  principal  loan  transactions  of 
the  Darmstadter  Bank  and  the  Disconto  Gesellschaft,  (the 
two  most  prominent  banks  of  the  period,)  are  given: 83 

STATE  AND  MUNICIPAL  LOANS. 

DARMSTADTER   BANK. 

1854 :  Baden  state  loan. 

Bavarian  state  loan. 
1858:  Bremen  state  loan. 

Swedish  state  loan. 
1860:  Swedish  state  loan. 
1 86 1 :  Swedish  mortgage  loan. 

(Lottery)  loan  of  the  Canton  Fribourg. 
1862 :  Worms  municipal  loan. 

1864:  Austrian  state  lottery  (Rothschild  syndicate). 
1866:  Bavarian  state  loan. 

Saxon  state  loan. 

Wiirttemberg  state  loan. 
1868:  Hessian  state  loan. 

Brunswick  (railway)  loan. 

Prussian  4  per  cent  state  loan. 

Hamburg  4%  per  cent  state  loan. 

DISCONTO-GESEUvSCHAFT. 

1859:  Prussian  (mobilisation)  loan  of  30,000,000  thalers,  effected  jointly 
with  the  leading  Berlin  banks  and  firms  under  the  management  of 
the  Disconto-Gesellschaft,  which  was  the  origin  of  the  so-called 
"  Prussian  Consortium  (syndicate) "  constituted  during  subsequent 
years. 

1866:  Four  per  cent  Baden  Loan  (30,000,000  thalers),  effected  jointly  with 
the  Seehandlung,  and  the  banking  firm  of  W.  H.  Ladenburg  & 
Sons,  at  Mannheim. 

Four  per  cent  Bavarian  issue  of  premium  loan  bonds  (35,000,000 
florins),  jointly  with  the  Royal  Bavarian  Bank  and  the  banking 
house  von  Erlanger  &  Sons,  Frankfort-on-the-Main. 
Brunswick  loan  (2,000,000  thalers). 

1867:  Four  per  cent  Baden  premium  loan  bonds  (12,000,000  thalers). 

1868:  Four  and  one-half  per  cent  Mannheim  municipal  loan  (3,200,000 
thalers)  for  the  construction  of  the  Mannheim -Karlsruhe  Railway; 
effected  jointly  with  the  banking  firms  of  W.  H.  Ladenburg  & 
Sons  and  M.  A.  v.  Rothschild  &  Sons  in  Frankfort-on-the-Main. 
Prussian  state  loan  of  40,000,000  thalers  and  5,000,000  thalers 
(Prussian  syndicate  under  management  of  the  Seehandlung). 


62 


The     German     Great    Banks 

1869:  Danzig  municipal  loan. 

Prussian  loans  (agreement  with  Frankfort-on-the-Main)  of  4,450,000 
thalers  and  550,000  thalers.  * 

The  German  banks,  following  the  example  of  the 
Credit  Mobilier,  also  founded  industrial  companies  as  early  J « 
as  this  period.  Thus  the  Darmstadter  Bank  undertook 
the  promotion  of  the  Wollmanufaktur  Mannheim  (paid- 
up  share  capital  400,000  florins),  of  the  Wurttembergische 
Kattunmanufaktur  (paid-up  share  capital  500,000  florins), 
of  the  Oldenburgische  Ostindische  Reederei  (paid-up  share 
capital  250,000  florins),  the  Kammgarns  pinner  ei  und 
Weberei,  Marklissa  (paid-up  share  capital  300,000  florins) , 
the  Ludwigshutte,  near  Biedenkopf  (paid-up  share  capital 
360,000  thalers,  jointly  with  the  Mitteldeutsche  Kredit- 
bank),  and  participated  in  the  transformation  of  the 
Maschinenfabrik  und  Eisengiesserei  Darmstadt  into  a  joint 
stock  company  (paid-up  capital  200,000  florins),  as  well 
as  in  that  of  the  Heilbronner  Maschinenbaugesellschaft. 

\  The  example  of  the  Credit  Mobilier  in  creating  subsid-  *| 
iary  companies  was  also  followed;  thus  the  Darmstadter   \ 
Bank  on  November  5,  1855,  founded  the  Hessian  Note- 
Issuing  Bank,  known  as  the  Bank  fur  Suddeutschland,  with 
a  capital  of  20,000,000  florins.     Finally  the  Darmstadter  v  ^ 
Bank,  like  the  Credit  Mobilier,  made  it  a  business  prin- 
ciple from  the  very  outset  to  remain  permanently  inter- 
ested  in   the   companies   which    it   promoted,  not   only 
through  permanent  representation  of  its  own  directors  on 
the  board  of  managers,  but  also  by  the  holding  of  a  large 
number  of  shares,  through  which,  however,  severe  losses    J 
were  frequently  sustained. 


National    Monetary     Commission 

Thus  it  participated  in  the  seven  industrial  and  com- 
mercial companies  which  it  promoted  or  transformed 
during  1856  (with  a  total  capital  of  1,580,000  florins)  with 
about  one- third  of  the  combined  share  capital  of  these  con- 
—  cerns  (813,157  florins) .  In  contrast,  however,  to  the  Credit 
Mobilier,  the  German  banks  never  consented  to  tie  up 

I  their  capital  during  the  period  in  question  by  unlimited 
advances  to  such  subsidiary  or  affiliated  companies.84 

Furthermore,  during  those  first  years  of  impetuous 
growth,  some  of  them,  like  the  Credit  Mobilier,  became 
interested  too  extensively  and  too  rapidly  in  railway  and 
|^  industrial  securities  and  enterprises,  though  thereby  they 
doubtless  rendered  great  and  permanent  service  to  the 
nation.  The  list  below  is  intended  to  give  a  detailed 
idea  of  the  most  important  railway  transactions  in  which 
the  Darmstadter  Bank  and.  the  Disconto-Gesellschaft 
participated  at  that  time. 

DARMSTADTER   BANK. 

1854:  Austrian  State  Railway  (taking  over  of  shares). 

1855:  Extension  of  the  Rhine  Railway  from  Nymwegen  to  Bingen. 

Theiss  Railway  (taking  over  of  shares). 

1856:  Financing  the  Bingen- Aschaffenburg  Railway  (via  Mainz)  and  pro- 
moting the  Elizabeth  Railway  (taking  over  of  shares). 
1859:  Four  and  one-half  per  cent  bonds  of  the  Rhine-Nahe  Railway  (guar- 
anteed by  State)  4,500,000  thalers,  jointly  with  the  Disconto- 
Gesellschaft. 
1861:  Preference  shares  of  the  Cologne-Minden  Railway. 

Private  sale  of  shares  and  bonds  of  the  Hessian  Ludwig  Railway. 
1862:  Placing  of  bonds  of  the  Livorno  Railway. 

Conversion  of  the  4^  per  cent  Thuringian  Railway  preference  shares 
Issue  of  1,200,000  florin  preference  shares  of  the  Hessian  Ludwig 

Railway. 
1863 :  Preference  silver  shares  of  the  Galician  Carl-Ludwig  Railway,  exempt 

from  taxation  (Rothschild  syndicate),  of  6,000,000  florins. 
Five  per  cent  preference  shares  of  the  Moscow-Riazdn  Railway  of 
5,000,000  rubles,  guaranteed  by  State. 


The     German     Great    B 


a  n 


Four  per  cent  preference  shares  of  the  Hessian  Ludwig  Railway  of 

about  3,000,000  florins. 
Silver  preference  shares  of  the  Galician  Carl-Ludwig  Railway  of 

5,000,000  florins  (Rothschild  syndicate). 
1866:  Shares  of  the  Hessian  Ludwig  Railway. 

Shares  of  the  Magdeburg-Leipzig  Railway  Lit.  B. 

Shares  of  the  Altona-Kiel  Railway. 

Preference  shares  of  the  Upper  Silesian  and  South-North  German 

Junction  Railway  (Reichenberg-Pardubitz) . 

1867:  Common  and  preference  shares  of  the  Fiinfkirchen-Bares  Railway 
and  construction  of  the  line,  as  well  as  of  the  Siebenburgen  and 
Franz  Joseph  Railway  (Rothschild  syndicate). 
First  preference  shares  of  the  Magdeburg-Halberstadt  Railway. 
Bonds  of  the  Russian  Kozlov-Woronezh  and  Poti-Tiflis  Railway. 
1868:  Shares  of  the  Hessian  Ludwig  Railway  (1,000,000  thalers). 

Five  per  cent  bonds  of  the  Hessian  Ludwig  Railway  (guaranteed  by 

State,  4,000,000  thalers). 

Five  per  cent  preference  shares  of  the  Hessian  Ludwig  Railway. 
Organization  of  the  Alfold  Railway  (Rothschild  syndicate). 
Construction  of  the  Arad-Temesvar  line  (Rothschild  syndicate). 
Shares  and  bonds  of  the  Austrian  North- West  Railway. 
Shares  of  the  Rhine  Railway  Lit.  B.  (5,000,000  thalers). 
1869:  Five  per  cent  preference  shares  of  the  Berlin-Potsdam-Magdeburg 

Railway  of  7,000,000  thalers. 
Five  per  cent  preference  shares  of  the  Upper  Silesian  Railway  of 

13,305,000  thalers. 
Four  and  one-half  per  cent  guaranteed  shares  of  the  Thuringian 

Railway  Lit.  C  of  4,000,000  thalers. 

Shares  of  the  Cologne-Minden  Railway  of  9,068,200  thalers. 
1869-70:  Purchase  of  the  entire  Brunswick  railway  system  from  the  Bruns- 
wick government  on  behalf  of  a  syndicate  for  1 1 ,000,000  thalers, 
and  an  annual  payment  of  875,000  thalers  for  sixty-four  years, 
and  transfer  of  its  management  and  of  the  further  extension 
of  lines  to  a  special  company. 

DISCONTO-GESEI/LSCHAFT. 

1853:  Five  per  cent  bonds,  guaranteed  by  the  State,  of  the  Moscow-Riazdn 
Railway  of  5,375,000  thalers;  jointly  with  the  Darmstadter  Bank, 
the  banking  firm  of  Sal.  Oppenheim  jr.,  &  Co.,  and  a  St.  Peters- 
burg house. 

1856:  Three  and  one-half  per  cent  bonds  of  the  Upper  Silesian  Railway 
Company. 

1857:  Four  and  one-half  per  cent  bonds  of  the  Cosel-Oderberg  Railway 
(1,500,000  thalers). 


National    Monetary     Commission 

1859:  Four  and  one-half  per  cent  State  guaranteed  bonds  of  the  Rhine 
Nahe  Railway  of  4,500,000  thalers  (jointly  with  the  Darmstadter 
Bank). 

1866-1868:  Shares  and  bonds  of  the  Bergisch-Markische  Railway. 

1867:  First  preference  shares  of  the  Nordhausen-Erfurt  Railway. 

1868:  Shares  of  the  Alsenz  Railway. 

Five   per   cent   bonds   of  the   Charkoff-Krementshug   Railway   of 
£1,716,000  (jointly  with  J.  H.  Schroder  &  Co.,  London). 

In  considering  this  great  activity  displayed  by  the  banks 
of  that  time  in  the  underwriting  and  issuing  of  securities, 
we  must  not  forget  that  (as  a  glance  at  the  list  will  show) 

Ghese  operations  were  almost  exclusively  confined  to  first- 
lass  securities,  the  introduction  of  which  has  proved  of 
;reat  benefit  to  the  German  investment  market.     It  must 
also  be  borne  in  mind  that  the  whole  task  of  carrying  out 
the  great  development  of  the  German  railway  system  at 
that  period  was  performed  by  means  of  German  private 
capital  (which  was  very  small),  and  by  the  aid  of  banks, 
with  a  total  share  capital  extremely  limited  in  comparison 
to  the  magnitude  of  the  undertakings. 

The  German  banks  at  that  time  (almost  without  excep- 
]  tion)    when  heavily   engaged,   took   immediate   steps  to 
I  restore  the  liquidity  of  their  resources  and  the  equilibrium 
*  between  their  assets  and  liabilities,  whereas  the  Credit 
Mobilier,  greatly  to  its  detriment,  postponed  such  attempts 
till  the  year  preceding  its  collapse. 

Thus  the  Darmstadter  Bank,  the  capital  of  which  had 
been  paid  up  in  full  in  the  first  series  (10,000,000  florins 
in  1855)  raised  its  capital  to  25,000,000  florins,  though  the 
attempt  made  in  1857  to  bring  it  up  to  the  amount  of 
50,000,000  florins  (provided  for  in  section  4  of  its  charter) 
failed  almost  entirely  by  reason  of  the  crisis  of  that  year.85 


66 


The     German     Great    Banks 

Consequently  the  bank,  up  to  1864,  pursued  the  course 
(justifiable  from  the  economic  point  of  view,  though 
hardly  from  a  business  standpoint)  of  reducing  the  loans 
on  current  account  from  4,500,000  florins  (1857)  to  about 
360,000 .  florins  (end  of  1859),  and  of  reducing  also  the 
"Lombard  and  covered  credits"  and  the  "loan  and 
mortgage  "  accounts.  The  same  course  was  followed  with 
regard  to  the  item  "illiquid  claims,"  always  specified  in 
the  reports  up  to  1864 86  although  the  administration  was 
doubtless  perfectly  aware  of  the  serious  objections  to 
such  reductions  from  a  business  point  of  view. 

The  Disconto-Gesellschaft  likewise  resolved,  as  early  as 
1856,  or  about  a  year  after  its  transformation  into  its 
present  form,  to  raise  its  commandite  capital  from 
10,000,000  thalers  to  20,000,000  thalers.  Owing  to  the 
crisis  of  1857,  however,  this  resolution  could  only  be 
partly  carried  out,  and  was  cancelled  later  on.87 

Like  the  Credit  Mobilier,  the  German  banks  in  the  early 
years  of  their  existence  (1855  and  1856),  mainly  under  the 
influence  of  the  highly  inflated  quotations  of  their  shares, 
made  the  great  mistake  of  distributing  excessive  dividends, 
mstead  of  holding  them  down  and  using  the  surplus  to  t 
strengthen  their  inner  position  and  reserves.     Thus  the 
Darmstadter  Bank  paid  dividends  of    10.66  per  cent  in 
1855  and  15  per  cent  in  1856,  and  the  Disconto-Gesellschaft 
1 3^2  per  cent  in  1856  (10  per  cent  for  nine  months) .     ThisV 
course  naturally  had  to  be  atoned  for,  especially  by  ex- 
treme fluctuations  of  dividends  during  the  next  few  years,   , 
and  by  large  decreases  during  bad  years.     The  dividends 
of  the   Darmstadter   Bank  and  those  of  the  Disconto- 


67 


National    Monetary     Commission 


Gesellschaft  during  this  period  (up  to,  and  including  1869) 
are  shown  in  the  following  table:88 


Year. 

Darmstadter 
Bank. 

Disconto- 
Gesellschaft. 

iSsa 

Per  cent. 
r  y. 

'Per  cent. 

1855                              -    -    

ioM 

i8s6 

1857                 -- 

1858 

r   IS 

i8co 

1860 

,   IX 

1861  

5 

1862 

6ya 

i  \4 

1863  

r  l^ 

bVa 

1864 

6 

ft  \t, 

1865  

6M 

6  ^ 

1866 

A  1A 

g 

1867  . 

bYi 

8 

1868 

8 

1869  

Q  14 

o-  For  nine  months. 

The  average  dividend  rate  of  the  Darmstadter  Bank 
was :  during  the  first  decade  of  its  existence  (i  853-1 862) ,  6  % 
per  cent;  during  the  second  decade  of  its  existence  1863- 
1872),  8.7  per  cent;89  that  of  the  Disconto-Gesellschaft 
during  the  first  ten  years  (1856-1865)  of  its  existence  as 
a  limited  joint  stock  company  (Kommanditaktiengesell- 
schaft) — 6.55  per  cent;  during  the  second  decade  (1866- 
1875),  13.15  per  cent.90  It  should  be  said  though,  that 
neither  bank  neglected  to  increase  its  surplus,  which,  for 
instance,  rose  in  the  case  of  the  Disconto-Gesellschaft 
from  16,600  marks  in  1852  to  2,640,495  marks  in  1860, 
and  of  the  Darmstadter  Bank  from  39,109.8  florins  in 
1854  to  1,553,363.18  florins  in  1868. 

In  contrast  to  the  Credit  Mobilier,  current  account 
business  was  fostered  during  the  period  under  discussion 

68 


The     German     Great    Banks 

by  both  banks  with  the  greatest  care  and  success,  although,  J 
in  the  case  of  the  Darmstadter  bank,  not  to  the  same 
extent  as  the  promotion  and  issue  business.91 

The  development  of  the  current  account  business  in  the 
Disconto-Gesellschaft  and  the  Darmstadter  Bank  during 
the  period  is  shown  in  the  tables  below  (pp.  70  and  71). 

The  tables  show  that  the  deposits  of  the  Disconto- 
Gesellschaft  amounted  on  December  31,  1869,  to  2,274,228 
marks,  and  those  of  the  Darmstadter  Bank  in  1869  (the 
end  of  this  period)  to  10,800,268.34  florins.  It  should  be 
said,  though,  that  this  large  amount  was  due  to  exceptional 
and  temporary  circumstances,  discussed  on  pp.  73  and  74. 

The  other  banks  to  be  considered  in  this  connection, 
the  activity  of  which  during  this  period  has  remained 
almost  unnoticed  in  literature,92  likewise  show  on  the 
whole  a  satisfactory  development. 


69 


National    Monetary     Commission 


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70 


The     German     Great    Banks 


II.  Darmstddter  Bank,  1853-1869. 


Year. 

Credits  in  cur- 
rent account. 

Debits  in  cur- 
rent account. 

Interest-bearing 
deposits  subject 
to  notice. 

*gc« 

Florins. 

Florins. 
935   431  •  33 

Florins. 
412,  430.  31 

1854 

632  079.  21 

2,  754,  870.  35 

868,  ooo.  oo 

1855    _       

388,  864.  34 

5,  605,  238.  53 

No  data. 

1856 

2    538    43O    80 

8,  972,  184.  27 

No  data. 

1857               . 

7  *3  •  So?.  58 

7,  043  ,015.22 

i,  307,  506.  30 

i8<;8 

226   269  39 

8  668  037   41 

3  i  337>  °6?  .  41 

1859 

674,  952.  58 

7.  999.  386.  39  M 

,  289,  928.  70 

1860             

619,  384.  19 

5,  674,  302.  57/4 

,  292,  170.  48 

1861 

S7o   775   55 

4,  670,  961  .  20 

,  276,  218.  50 

1862                                             ..    . 

935  >  795  •  37  % 

3  ,  701  ,  974.  15 

,  292,  170.  48 

1863           -_- 

i,  228,  338.  14 

2,  724,  939.  47 

,  732,  989.  33 

1864 

736   860  42 

2,  261,  145.  19 

No  data. 

1865 

816,  5  19.  45 

2,  96l,  32O.  2O 

i,  183,  879.  18 

1866      

5  i  i  i  963.  36 

3,  464,  719.  80 

No  data. 

1867 

828  939.  41 

3  ,  243  ,  465  .  15 

No  data. 

1868                 .              .            

785,  450.  58 

9,  136,  926.  28 

No  data. 

1869  

2,  244,  432.  41 

7,  429,  533.03 

10,  800,  268.34 

The  A.  Schaaffhausen'scher  Bankverein,  founded  in  "> 
1848  with  a  business  capital  of  5,187,000  thalers  (see  p.  46) 
(of  which,  however,  only  3,199,800  thalers  had  been 
issued  at  the  start),  during  the  first  years  of  its  exist- 
ence95 under  the  cautious  and  experienced  management 
of  W.  If.  Deichmann,  Gustav  Mevissen,  and  Victor  Wen- 
delstadt  succeeded  in  starting  important  industrial  under- 
takings, as  well  as  in  establishing  numerous  industrial 
connections,  especially  in  Rhenish  Westphalia.  Thus,  for 
the  purpose  of  mobilizing  the  industrial  participations 
of  the  firm  of  A.  Schaaffhausen,  it  took  a  considerable 
part  as  early  as  1851  in  the  founding  of  the  Hoerder 
Bergwerks-  und  Huttenverein,  at  Cologne,96  in  1852  in  the 
Coiner  Ber  giver  kverein,97  as  well  as  in  the  establishment  of 
the  Colnische  Baumw  oils  pinner  ei  und  Weberei;  the  Col- 
nische  Maschinenbau-Aktiengesdlschaft,  the  Coln-Musener 


National    Monetary     Commission 

Bergwerks-Aktiengesellschaft,  and  the  Colnische  Ruckver- 
sicherungs-Gesellschaft. 

"The  board  of  directors,"  says  the  business  report  for 
1852  (p.  3),  "acted  on  the  principle  that  the  function 
of  a  great  banking  institution  is  not  so  much  to  start 
new  branches  of  industry  through  extensive  participa- 
tions, as  to  induce  the  capitalists  of  the  country,  by 
recommendations  based  on  exhaustive  investigations,  to 
turn  idle  capital  toward  such  enterprises,  which,  when 
properly  launched,  in  response  to  existing  requirements, 
and  offering  the  guarantee  of  expert  management,  bid  fair 
to  yield  reasonable  profits." 

As  early  as  1851,  the  item  "Participations  in  Industrial 
Enterprises"  amounted  to  434,706  thalers.  Up  to  1858 
the  following  promotions  were  added  to  those  already 
mentioned : 

The  Concordia,  Colnische  Lebensversicherungsgesellschaft; 
theAgrippina,  Colnische  Transportversicherungsgesellschaft, 
and  the  Colnische  Hagelversicherungsgesellschaft. 

The  A.  Schaaffhausen'scher  Bankverein  took  part  also 
in  the  foundation  of  the  Bank  fur  Handel  und  Industrie 
(Darmstadter  Bank),  the  Bank  fur  Suddeutschland  in 
Darmstadt  as  well  as  of  the  Colnische  Privatbank  at 
Cologne.  Further,  it  assisted  at  that  time  in  the  amalga- 
mation of  the  Rhenish,  the  Bonn-Cologne,  and  the 
Cologne-Crefeld  railway  companies  into  one  unified  system 
of  railways,  with  a  union  railway  station  at  Cologne. 

The  development  of  the  current  account  connections, 
mostly  drawn  from  the  industrial  and  commercial  circles 
of  the  Rhineland  and  Westphalia,  is  shown  in  the  following 
table: 


72 
i 


The     German     Great    Banks 


Year. 

Debits  in  current  account. 

Credits  in  current  account. 

Number. 

Total 
amount.  98 

Number. 

Total  amount. 

1852*9  

472 
604 
643 
632 
636 
665 
653 
613 
614 
616 
619 
651 

Thalers. 

624 
590 
611 
630 
639 
621 
639 
622 
675 
676 
708 
692 

Thalers. 

1853  

1854.. 

1855  

1856 

1857  

1858  

1859 

1860.      ... 

1861  L__. 

i862_ 

1863  .    ...    . 

6.959.285.58 
7,212,472   05 

5.345.243-98 
5,924,  497.  66 
6,  270,  191  .  84 
5,  661,  290.  25 
5.  599,  028.  ii 
6.849,356.88 
6.  555,  008.  56 

1864  

1865  
1866  
1867  



8,  252,  631.  32 
7,339.369-58 
7,113    860   39 



1868... 

7.951.  485.  26 
8,433.753.36 

1869  





As  to  deposits  (it  is  important  to  establish  this  fact  as7 
the  result  of  a  deliberate  business  policy) ,  no  appreciable 
increase  during  the  period  under  contemplation  could  be   \ 
expected,    owing   to   the   principles   adopted   by  the  A. 
Schaaffhausen'scher  Bankverein  as  well  as  by  most  of  the 
other  credit  banks. 

''According  to  the  principles  adopted  after  discussion^ 
with  the  Board  of  Managers,"  says  the  business  report  of 
the  Bankverein  for  1850  (Appendix  2  to  the  minutes  of 
the  general  meeting,  September  14,  1850)  deposits  are 
received  only  on  condition  that  three,  six,  and  twelve  j 
months'  notice  be  given  before  withdrawal.  It  is  only 
because  of  these  principles  and  the  low  rate  of  interest 
that  the  amount  in  hand  is  insignificant  when  compared 
with  former  years.  In  the  interest  of  the  perfect  safety 


73 


National    Monetary     Commission 

of  our  institution  we  do  not  deem  it  advisable  to  endeavor 
to  obtain  an  increase  in  the  deposits  through  more  attrac- 
tive terms;  we  much  prefer  to  carry  on  the  business  with 
our  own  means,  to  the  extent  that  such  action  is  at  all 
possible  in  the  banking  business  and  is  in  the  interests 
of  our  correspondents." 

The  deposits  at  the  Bankverein  at  the  end  of  this  period 
(1869)  amounted  to  883,616.80  thalers. 

The  dividends  paid  on  stock  Lit.  B  (according  to  section 
10  of  the  statutes,  the  capital  and  fixed  dividends' of  4^ 
per  cent  on  stock  Lit.  A  were  guaranteed  by  the  State) 
during  this  period  amounted  to: 

Per  cent. 

1 848-1 85 1 4 

1852 6</s 

1853 6>£ 

1854--  6^ 

1855 9 

1856 9>/ioo 

1857 9 

1858 6 

1859 6 

1860 6 

1861 6K 

1 862 i 

1863 7 

i864__  7# 

i865__  yK 

i866__  ?K 

1867 7^ 

i868__  7^ 

1869 8 

i87o__  8 14 

The  profits  of  the  business  were  thus  quite  satisfac- 
tory,101 and  the  surplus  funds  amounted,  as  early  as  Decem- 
ber 31,  1857,  to  320,388.63  thalers. 

The  extension  of  the  business  by  the  establishment  of 
branches,  agencies,  and  commandites  had  been  contem- 


74 


The     German     Great    Banks 

plated  as  early  as  1853  (business  report  for  1853,  p.  3), 
and  at  the  general  meeting  of  September  29,  1855,  a  reso- 
lution was  passed  to  add  a  paragraph  (par.  82)  to  the  by- 
laws, which  read  as  follows:  "The  company  is  authorised 
to  establish  a  branch  in  Berlin,  as  well  as  agencies  and 
commandites  abroad."  This  resolution,  however,  was  not 
carried  into  effect,  owing  to  the  refusal  of  the  Prussian 
Ministry  of  Finance  and  Trade  to  ratify  the  change  of  the 
by-laws.  _ 

The  Berliner  Handelsgesellschaft,  founded  in  1856,  de- 
voted itself  successfully,  from  the  very  outset,  to  the  fur- 
therance of  the  issue  business  (in  accordance  with  section 
2  of  its  by-laws,  see  note  73).  Its  nominal  capital 
was  15,000,000  thalers,  of  which,  however,  only  3,740,150 
thalers  were  paid  up  (1859,  3,786,200  thalers);  of  the  lat- 
ter, again,  800,000  thalers  (4,000  shares  nominally  at  200 
thalers)  remained  in  the  portfeuille  of  the  company. 

In  1856  it  participated  in  the  Carinthia  Railway  (merged 
in  1858  with  the  Lombard  Railway),  and  in  1862  in  the 
conversion  of  the  4^  per  cent  preference  bonds  of  the 
Hamburg-Berlin-Potsdam-Magdeburg  and  Thuringia  Rail- 
way; during  1867,  in  the  flotation  of  the  Baden  4^2  per 
cent  state  loan  and  4  per  cent  premium  loan,  of  the  Magde- 
burg and  Halberstadt  original  preference  shares,  and  of  the 
Thuringia  Railway  shares.  Further,  it  negotiated  the 
issue  of  the  5  per  cent  Kozlov-Voronezh  and  the  5  per 
cent  East  Prussian  Southern  Railway  preference  bonds. 

In  1868,  when  the  commandite  capital,  which  had 
been  reduced  meanwhile  to  7,500,000  thalers  (of  which 
at  that  time  3,786,200  thalers  had  been  issued),  was  paid 
up  to  the  amount  of  5,625,000  thalers,  it  participated  in 


75 


National    Monetary     Commission 

the  issue  of  the  4^  Per  cent  Upper  Silesian  preference 
bonds,  the  Russian  Land-credit  mortgage  bonds,  the 
Yeletz-Orel  preference  bonds,  the  4^  per  cent  Prussian 
state  loan  of  1867  Lit.  D.  to  the  amount  of  24,000,000 
thalers,  part  of  which  was  issued  in  1868,  and  in  addition 
arranged  successfully  for  the  public  subscription  and 
placing  of  the  5  per  cent  (state — guaranteed)  preference 
bonds  of  theShuya-Ivanovo,  Kursk-Charkov,  andCharkov- 
Azov  Railway;  of  the  4><  per  cent  preference  bonds  of 
the  Breslau-Schweidnitz-Freiburg  Railway;  of  the  /X  per 
cent  Roumanian  Railway  bonds,  and  of  part  of  the  first 
preference  bonds  of  the  Halle-Sorau-Gubener  Railway. 

Finally,  in  1869,  it  took  a  nominal  part  in  the  issue  of 
the  5  per  cent  bonds  of  the  Moscow-Smolensk  Railway; 
of  the  5  per  cent  preference  bonds  of  the  East- Prussian 
Southern  Railway;  of  the  4^  per  cent  preference  bonds 
of  the  Magdeburg-Cothen-Halle-Leipzig  Railway;  of  the 
shares  of  the  Breslau-Schweidnitz-Freiburg  Railway,  and 
of  the  Gotha  premium  mortgage  debentures;  it  also  had  a 
secondary  participation  (unterbeteiligt)  in  the  taking  over 
of  the  original  and  preference  shares  of  the  Schlesische 
Zinkhutten,  of  the  preference  shares  of  the  St.  Petersburg- 
Baltishport  Railway,  and  of  the  loans  of  the  Italian 
Government  raised  on  the  church  estates. 

The  commissions  on  the  current  business  amounted  to — 

Silber-  Pfen- 

Tnalers.     groschen.          nige. 


1857  

1858  

1859  

J4 

TQ 

1860  

' 

1861  

To 

1862  

6i>  393 

1863  

1 

6 
10 

i 
ii 

i 
3 


76 


The     German     Great    Banks 


Silber-       Pfen- 
Thalers.         groschen.     nige. 


1864 • .  68,  106  22 

1865 67,349  28 

l866 82,  210  21 

1867 78,735  16 

1868 128, 034  26 

1869. 134, 654  27 


The  dividends  amounted 

Per  cent. 

1857 5'/6 

1858 sX 

1859 5 

(About  half  of  which  was  taken  from  the  surplus  fund.) 

1860 4% 

1861 5 

(About  half  of  which  was  taken  from  the  surplus  fund.) 

1862 9 

1863 8 

1864 8 

1865 8 

1866 8 

1867 8 

1868 10 

1869 10 

All  arrangements  had  been  made,  according  to  the 
business  report  of  1857,  for  the  establishment  of  com- 
mandites  in  other  towns,  but  the  realization  of  these 
plans  had  to  be  postponed  owing  to  the  crisis. 

Only  the  banking  firm  of  Messrs.  Breest  &  Gelpcke  in 
Berlin  carried  on  business  on  account  of  the  Berliner 
Handelsgesellschaft  since  January,  1857.  This  firm,  how- 
ever, sustained  large  losses  in  1863  through  the  failure  of 
a  large  export  firm  at  Danzig. 

The  Mitteldeutsche  Kreditbank  103  was  founded  in  1856 
with  a  capital  of  8,000,000  thalers,  of  which  3,000,000 
remained  in  the  portefeuille  of  the  bank,  while  of  the 
remaining  capital  of  5,000,000  thalers,  1,000,000  thalers 
were  redeemed  in  1859  (see  p.  47.)  This  bank,  as  stated 


77 


National    Monetary     Commission 

before,  should  properly  not  concern  us  in  this  connection, 
as  during  the  period  in  question  it  was  a  note-issuing  bank. 
Its  note  issue  amounted  to  1,688,660  thalers  in  1857  and 
to  4,000,000  thalers  in  1868.  At  Frankfort-on-the-Main 
an  "agency"  (August  Siebert)  was  established  in  1856, 
which  was  transformed  into  a  branch  office  in  1872. 

The  Bank  took  an  active  part  shortly  after  its  founda- 
tion in  a  series  of  industrial,  state,  and  railway  transac- 
tions, which,  however,  were  not  always  successful. 

Thus  in  1856  it  participated  to  the  extent  of  one-third 
in  the  purchase  of  the  Ludwigshutte,  near  Biedenkopf, 
which  was  transformed  in  1858  (under  the  name  of 
Oberschlesischer  Huttenverein)  into  a  joint-stock  company 
with  a  capital  of  600,000  florins.  This  operation  caused 
serious  losses  to  both  partners  (the  Darmstadter  Bank 
participated  to  the  extent  of  two-thirds). 

The  participation  during  1856  in  a  cigar  factory  at 
Wassungen  in  the  Duchy  of  Meiningen  also  terminated 
badly. 

On  the  other  hand,  it  attained  satisfactory  results  in 
its  simultaneous  participation  in  the  Hochheim  enterprise 
of  sparkling  wines  (Burgeff  &  Co.),  which  was  transformed 
into  a  joint-stock  company  in  1857;  also  in  negotiating 
a  \yz  per  cent  Swedish  loan  (jointly  with  the  Darmstadter 
Bank),  and  in  a  i co-florin  lottery  certificate  loan,  guar- 
anteed by  the  Austrian  Government,  as  well  as  in  taking 
over  a  preference  loan  of  the  Werra  Railway  (1,000,000 
thalers),  and  in  its  participation  in  the  establishment  of 
the  insurance  society  "Providentia,"  at  Frankfort-on- 
the-Main. 


The     German     Great    Banks 

It  was  interested  in  the  development  of  the  brown  coal 
industry  in  the  Nieder-Lausitz  district  from  the  very  com- 
mencement of  this  industry;  particularly  in  the  Eintracht, 
Braunkohlenwerke  und  Brikettfabriken,  and  the  Use, 
Bergbau-A  ktiengesellschaft. 

In  1858  it  participated  in  taking  over  the  balance  of 
theWerra  preference  shares  of  250,000  thalers;  a  4^  per 
cent  loan  of  the  city  of  Bremen;  and  the  4^  per  cent 
preference  shares  of  the  Frankfort-Hanau  Railway. 

In  1862  it  took  a  leading  part  in  the  founding  of  the 
Deutsche  Hypotheken-Bank  at  Meiningen. 

During  the  greater  part  of  the  period  under  considera- 
tion, it  devoted  itself  to  the  regular  (current)  business. 
Its  turnover  amounted  to — 


IYear. 

At  the  main 
office. 

At  the  agency  in 
Frankfort-on-the- 
Main. 

1858  ___  _._ 

Thalers. 
96,  095,  137.  01 

Thalers. 

84  818   800  50 

1859 

1860      

6l     213     7O9     22 

1861  

57.  79o,  084.  68 

1862 

1863  .. 

165   869  918  46 

1864  

J59»  529,  216.  46 

1865 

1866  

138   819  867   94 

1867  .  

i  19,  03  i,  959.  50 

1868 

166  972   868  90 

1869  

263,  770   732   68 

.  

The  commissions  amounted  to — 

Thalers. 

1857 58,067.39 

1858 23,660.02 

1 859 28,  962 .  48 

l860--  34,930-77 

1861 73,175.81 

1862 206,847.58 


79 


National    Monetary     Commission 

Thalers. 

1863 -  114,998.13 

1864 -  115.046-66 

1865 -  101,401.46 

1866 76,664.87 

1867 ---  73,  268.  79 

1868 -  115,407.34 

1869 -  146,407-43 

The    current   account   business    showed   the   following 
results : 


Year. 

Credits. 

Debits. 

Number  of 
accounts. 

Amount. 

Number  of 
accounts. 

Amount. 

1857                   _ 

Thalers. 

469,  268.  20 
578,029.84 

492,  810.  82 
688,  059.  09 
768,  511.  91 
,  200,  912.  81 
,  561,300.64 
,901,955-53 
,853.521.41 
,  254,  1.10.  70 
>  553,950.  14 
,  588,034.88 
,947,910.  74 

Thalers. 
i,  594,  721.  ii 
i,  441,  089.  oo 
981,  676.98 
1,642,  790.  67 

2,  289,  436.34 

2,673,483.57 
2,879,205.88 

3,  152,  198.46 
2.  949,  646.  69 
2,  990,  217.87 
3,  on,  208.  17 
2,933.362.84 
4,658,450.31 

1858 

1859 

2IO 

205 
216 
278 
312 
3°9 
347 
316 
239 
285 
3i6 

348 
399 
415 
547 
687 
726 
709 
677 
493 
588 
656 

1860 

1861            

1863 

1863     

1864 

1865   

1866 

1867  

1868 

1869  

The  following  dividends  were  declared: 


Per  cent. 

1857  

6 

1858  

6 

1859  

4 

i86o_  

A 

1861  

6 

1862  

7 

1863  

7 

1864   

7  J^ 

1865  

7 

i866_  

6 

1867  

7 

1868  

1869  

10 

80 


The     German     Great    B 


a  n 


The  deposits  increased  from  490,599.54  thalers  in  1858 
to  756,465  thalers  in  1869. 

The  silent  partnership  (commandite)  account  stood,  as 
early  as  1858,  at  i  ,103,1 1 1  thalers,  without  the  commandites 
being  named.  It  is  only  in  the  report  for  1860  that  a 
Berlin  commandite  is  mentioned,  namely,  Messrs.  A.  Wolff  - 
sohn  &  Co.,  whose  place  was  taken  by  Messrs.  G.  Miiller  & 
Co.  in  1866.  This  commandite,  simultaneously  with  the 
Frankfort  Agency,  was  changed  into  a  branch  office  in 

1873- 

During  1869,  1870,  and  1871  the  original  capital  of  the 
bank,  which  had  been  reduced  to  4,000,000  thalers,  was 
increased  again  to  8,000,000  thalers,  and  in  1872  to 
16,300,000  thalers,  equal  to  48,900,000  marks.104 

The  liquidity  of  the  bank's  resources  was  nearly  always 
maintained,  although  energetic  intervention  was  occasion- 
ally necessary.  Thus,  at  the  end  of  1859  the  bank  owned 
securities  to  the  value  of  179,813.32  thalers;  and  succeeded 
in  reducing  the  same  during  one  year  (1860)  to  132,210.32 
thalers,  or  by  47,603  thalers. 

The  attitude  of  the  banks  during  the  crisis  of  1857  was,  ^ 
generally    speaking,    economically    correct.     The    Darm- 
stadter  Bank,  for  instance,  could  point  out  in  its  report  for 
1857  that  during  that  year  it  was  able  to  ease  and  mitigate 
the  economic  situation  by  retarding  industrial  promotions 
and  by  opportune  interventions  on  the  stock  exchange;  -, 
through  which  course,  however,  its  holdings  of  securities    •  -— 
rose  from  8,500,000  to  10,500,000  florins  in  1858,  and  to 
12,500,000  florins  in  1859,  causing  considerable  loss  later 
on.     During  that  year  (1857)  it  was  able  to  advance  con- 
siderable sums  to  the  Hamburg  Senate,   as  well  as  to 

90311°— IT 7  Si 


L 


National    Monetary     Commission 

several  banks,  thus  proving  that  it  had  seasonably  and 
successfully  strengthened  the  liquidity  of  its  resources. 

The  A.  SchaafThausen'scher  Bankverein  also  empha- 
sized in  its  business  report  for  1857  (p.  i)  that  "its  large 
available  means  had  enabled  it  at  the  time  of  the  crisis 
to  continue  to  grant  credit  to  its  old  solid  clients,  as  well 
as  to  increase  the  same  suitably  wherever  it  appeared 
advisable.  '  ' 

Similarly,  the  Berliner  Handelsgesellschaft  report  for 
1857  (p.  2)  states:  "During  the  crisis  we  have  helped  to 
smooth  over  difficulties  by  opportune  assistance  in  numer- 
ous cases  where  a  proper  assurance  was  given  that  the 
assistance  granted  would  be  repaid." 

In  all  issue  business  and  flotation  activity,  however, 
the  banks  at  that  time  were  not  slow  to  perceive  clearly 
the  importance  and  necessity  of  the  fundamental  principle 
underlying  all  prudent  banking  policy,  namely,  the  dis- 
tribution of  risk;  a  principle  which  was  adhered  to  by 
several  banks  in  their  issue  transactions  to  an  extent  that 
often  proved  disadvantageous  to  their  profits. 

In  1859  the  Darmstadter  Bank  (probably  for  the  first 
time)  formed  a  "bank  syndicate"105  for  the  purpose  of 
taking  over  several  engagements  which  had  to  be  settled 
in  1860  (especially  the  Rhein-Nahe  Railway  bonds),  a 
proceeding  emphasized  in  the  business  report  of  1860  in 
the  following  words:  "This  form  has  its  decided  advan- 
tages, as  it  reduces  risk  and  facilitates  operations."  106 

It  must  be  admitted  that  the  business  reports  107  of  that 
period  left  much  to  be  desired  as  far  as  lucidity  and  con- 
ciseness are  concerned  (this  was  owing  to  the  fact  that  a 
proper  form  had  yet  to  be  found)  •  thus  complaints, 

82 


The .German     Great    Banks 

both  justifiable  and  unjustifiable,  were  not  lacking. 
Nevertheless,  it  must  be  emphasized  that  hardly  any  one  of 
them  contained  self -advertising  commendation,  and  that 
frequently  they  contained  warnings,108  and  that,  for  in- 
stance, Model  (op.  cit.,  p.  36)  was  able  without  any 
difficulty  to  compile  the  profit  and  loss  of  the  Darmstadter 
Bank  from  1853  to  l856,  although  a  specified  profit  and 
loss  account  was  attached  to  the  reports  only  beginning 
with  the  year  1859. 

The  business  reports  of  the  A.  Schaaffhausen'scher 
Bankverein  can  also  be  described  as  thorough  and 
exhaustive. 

On  the  whole,  it  may  be  said  of  the  banks  whose  activity 
falls  within  the  period  under  consideration  that  they  made 
satisfactory  progress  in  the  organization  and  extension  of 
business  connections  (Kundengeschdft) ,  and  that  they 
undertook,  with  growing  success,  state,  financial,  and 
railway  transactions  on  a  large  scale,  and  to  a  far  greater 
extent  than  industrial  transactions. 

The  words  used  by  a  specially  competent  expert,109  in 
reviewing  the  activity  of  the  Darmstadter  Bank  during 
the  first  period,  apply  equally  to  all  the  banks,  at  least  to 
the  most  prominent  of  the  period;  namely,  that  they 
"  rendered  special  service  in  the  development  of  European 
state  credit  and  in  the  execution  of  great  railway  construc- 
tions." 

After  reviewing  the  great  work  performed  by  the  Ger-v 
man  credit  banks  during  this  first  period — a  work  executed 
gradually  and  gropingly,  not  without  many  faults  and  mis- 
takes, but  neither  without  great  and  permanent  success, 
although   in    the   face   of   serious   interruptions   through  y 

83 


National    Monetary     Commission 

European  wars  no  and  grave  crises  m — it  will  be  difficult  to 
accept  the  view  of  A.  Weber  that  German  joint-stock 
banking  may  be  said  to  have  become  a  common  form 
only  in  the  beginning  of  the  seventies  (op.  cit.,  p.  47). 

Neither  can  we  adopt  the  extremely  subjective  view- 
point of  Max  Wirth,  the  South  German  contemporary 
critic,  concerning  the  activity  of  the  German  banks  during 
this  period.  In  his  book  on  commercial  crises  (p.  271)  he 
places  the  fact  that  the  Darmstadt er  Bank  participated  in 
1857  in  the  promotion  of  the  North  German  Lloyd,  under 
the  heading  "The  requirement  of  industry  and  trade," 
following  it  up  with  an  exclamation  mark,  and  manifests 
indignation  at  the  bank's  promotion  of  the  "Concordia 
Spinning  and  Weaving  Works"  (formerly  S.  Woller),  still 
flourishing  in  Bunzlau  und  Marklissa,  by  referring  to  it  as 
the  "  Promotion  of  worsted  spinning  works  in  far-away 
North  Germany." 


84 


PART  III. 

THE   SECOND   PERIOD    (FROM    1870  TO   THE 
PRESENT  DAY). 

CHAPTER  I. 

(i)  TABLE  OF  EVENTS  DURING  THE  SECOND  PERIOD  WHICH 
INFLUENCED  THE  DEVELOPMENT  OF  THE  GERMAN  BANK- 
ING SYSTEM. 

1871-72 Termination  of  the  Franco-German  war;  sudden  influx  of  the 

war  indemnity  of  5,000,000,000  francs;  irregular  expansion 
of  the  German  system  of  private  railways,  impetuous 
growth  of  production,  rise  of  workmen's  wages,  of  almost 
all  prices,  especially  prices  of  raw  material  and  mining 
products;  strong  speculative  movement  in  all  branches  of 
commerce  and  industry;  beginning  of  the  industrial  cartel 
movement. 

Establishment  of  provincial  discount  companies  in  Ber- 
lin, Hanover,  Aix-la-Chapelle,  Bernburg,  Elberfeld,  Ham- 
burg, Duisburg  Ludwigshafen. 

1871 Foundation  of  the  Deutsche  Bank,  marking  the  commence- 
ment of  a  systematic  development  of  the  deposit  busi- 
ness, of  the  industrial  export  policy  of  the  credit  banks,  and 
of  the  concentration  of  German  banking. 

1873 Bourse  and  industrial  crisis. 

1874-1878.  .  .Economic  depression. 

1875 Foundation  of  the  "Reichsbank"  (began  business  January  i, 

1876). 

1876 Bank  discount  rate  falls  to  3^  per  cent  in  Berlin. 

1877-1878.  .  .  Russo-Turkish  war. 

1879-1882.  .  .Economic  revival;  formation  of  foreign  railway  companies, 
and  the  issue  of  foreign  loans. 

1879 Bank  discount  falls  to  3  per  cent  in  Berlin. 

1879 The  commencement  of  the  conversion  of  German  state  rail- 
way and  municipal  bonds;  reorganization  of  the  German 
bank  and  coinage  system,  adoption  of  the  gold  standard; 
beginning  of  the  state  purchase  of  the  German  private  rail- 
ways; treaty  of  alliance  with  Austria. 

1883-1887.  .  .Depression  in  all  fields;  continuation  of  the  issue  of  foreign 
securities. 

85 


National    Monetary     Commission 

1887 Alliance  with  Italy. 

1888-1890.  .  .Boom,  large  number  of  promotions,  transformations,  issues, 
bourse  speculation,  difficulties  in  meeting  payments  on 
the  state  loans  of  Argentina,  Portugal,  Greece,  etc. 

1891-1894.  .  .Depression  and  stagnation  in  all  directions. 

1891 Failure  of  several  Berlin  banking  concerns. 

1893 Foundation  of  the  Rheinisch-Westfalisches  Kohlen-Syndikat. 

1893 Meeting  of  the  bank  inquiry  commission. 

1895 Commencement  of  an  upward  tendency;  quotations  of  the  3 

per  cent  Imperial  consols  rise  to  100.30  and  of  the  3  per 
cent  Prussian  consols  to  100.40;  beginning  of  a  systematic 
industrial  policy  of  the  banks;  foundations,  transforma- 
tions, issues;  most  of  the  great  banks  raise  their  capital. 

1896-97 The  upward  movement  intensified;  brilliant  development  of 

the  electro-technical  industry;  further  extension  of  the 
German  (state)  railway  system;  increase  of  the  Imperial 
Navy. 

1897 Formation  of   the  Rheinisch-Westfalisches  Roheisensyndikat; 

fusion  of  interests  (Interessengemeinschaft)  between  the 
Deutsche  Bank  on  the  one  hand,  and  the  Bergisch-Mar- 
kische  Bank  at  Elberfeld,  and  the  Schlesischer  Bankverein 
at  Breslau  on  the  other,  in  order  to  promote  an  industrial 
banking  policy  (denoting  the  commencement  of  close  rela- 
tions between  the  great  banks  and  industry)  which  gave 
an  impetus  to  concentration  of  banking. 

1898-1900.  .  .  Market*at  its  highest;  rise  of  the  average  bank  discount  rate 
in  Berlin  to  5.33  per  cent  and  of  the  private  discount  rate 
to  4.41  per  cent  (1900).  Growth  of  money  requirements 
through  the  predominance  of  cash  transactions  in  bourse 
speculation  instead  of  time  bargains,  as  a  result  of  the 
bourse  law  of  January  i,  1897. 

1898 Outbreak  of  the  Spanish- American  war. 

1 899 Transformations,   new  promotions,   and  issues  show  a  new 

record. 
Outbreak  of  the  Boer  war. 

1900 Quotation  of  the  3  per  cent  German  Imperial  consols  falls  to 

86.74  (as  compared  with  quotations  of  99.63  of  the  2^. 
per  cent  British  consols,  and  of  100.60  of  the  3  per  cent 
French  rente).  The  Deutsche  Bank  takes  over  200,000,000 
marks  of  German  Imperial  and  Prussian  consols. 

1900-01 Crisis,  fall  in  quotation  of  mining  securities  (end  of  March  to 

beginning  of  July);  failure  of  the  Pomeranian  Mortgage 
Bank,  of  the  Mecklenburg -Strelitz  Mortgage  Bank, 
of  the  Prussian  Joint -Stock  Mortgage  Bank,  of  the 
Deutsche  Grundschuldbank,  the  Dresdner  Bank  fur  Handel 
und  Gewerbe,  the  Leipziger  Bank,  and  of  many  industrial 


86 


The     German     Great    Banks 

undertakings  especially  in  the  electro-technical  branch. 
Energetic  intervention  of  the  great  banks,  strengthening 
of  the  concentration  movement;  disposal  to  an  American 
syndicate  of  80,000,000  marks  4  per  cent  state  treasury 
bills  repayable  in  1904  and  1905;  maintenance  of  the  low 
bank  discount  rate  (3^  per  cent)  until  the  end  of  Sep- 
tember. 

1901-1902.  .  .Continued  large  needs  of  money  on  the  part  of  the  Empire, 
the  individual  states,  and  municipalities,  outbreak  of  the 
Chinese  troubles;  foundation  of  the  United  States  Steel 
Corporation  (1901). 

1902-1906.  .  .Recovery;  bank  discount  rate  falls  to  3  per  cent  (February, 
1902),  then  increases  to  4  per  cent  (October,  1902).  Feb- 
ruary 9,  1904,  outbreak  of  the  Russian-Japanese  war. 
1904:  Foundation  of  the  Stahlwerksverband  at  Diisseldorf ; 
impetuous  movement  of  concentration.  1905:  Founda- 
tion of  the  Oberschlesischer  St&hlwerksverband. 

1907 American  crisis;  considerable  rise  of  discount  rates  up  to  7^ 

percent  (average,  6.03  per  cent). 

1908 Termination  of  acute  crisis  in  America;  recovery;  money  be- 
coming available;  fall  of  the  bank  rate  from  7^2  per  cent  in 
January  to  4  per  cent  in  December;  average  4.76  per  cent. 

1909 Money  circulates  more  freely ;  political  troubles  owing  to 

conflict  between  Austria  and  Servia;  bank -law  amend- 
ment; in  the  last  months  of  the  year  beginning  of  an 
improvement  in  some  branches  of  industry,  especially  in 
the  mining  industry. 

(2)   SKETCH  OF  THE  ECONOMIC  DEVELOPMENT  OF  GERMANY 
FROM     1870    UNTIL    THE    PRESENT. 

The  result  of  the  victory  in  the  great  Franco-German 
war  was  the  creation  of  the  German  Empire  in  1871. 

Unity  was  established  gradually  also  in  economic  life. 
Weights  and  measures,  the  coinage  and  monetary  sys- 
tems,1 the  constitution  of  law-courts,  procedure,  and 
law,2  were  unified  by  degrees,  and  the  army  and  navy 3 
linked  firmly  together  for  the  protection  of  the  gains 
attained.  A  central  note  bank  (the  Reichsbank)4  was 
founded  for  the  purpose  of  regulating  the  money  circula- 
tion and  facilitating  payments.  Furthermore,  a  supreme 
court  for  the  Empire5  was  created. 


National     Monetary     Commission 

The  right  of  free  migration  and  free  competition  (rec- 
ognized as  early  as  the  sixties  in  the  independent  indus- 
trial legislation  of  the  various  German  States)  was  intro- 
duced everywhere,  at  first  through  confederate  and  then 
through  Imperial  legislation. 

The  epoch  commencing  in  this  manner  represents  one 
of  the  greatest  economic  revolutions  that  has  probably 
ever  taken  place  in  any  modern  civilized  state. 

It  does  not  lie  within  the  scope  of  this  work  to  attempt 
to  describe  these  changes  exhaustively.  The  extent  and 
the  development  of  the  problems,  however,  which  had  to 
be  solved  by  the  German  banks  during  the  period  under 
consideration,  could  hardly  be  comprehended  without  a 
brief  description  of  at  least  those  chief  factors  of  the 
economic  development  which  had  particular  influence  on 
the  growth  of  German  banking.  It  is  only  within  such 
limits  that  I  have  attempted  to  sketch  them  in  the  fol- 
lowing outline. 

I  will  attempt  to  summarize  the  numerous  important 
factors  in  this  development  under  the  following  two  heads : 

This  development  is  characterized  on  the  one  hand  by 
an  enormous  expansion  in  almost  all  directions  of  public 
and  private  activity,  coupled  with6  a  further  shifting  of 
the  center  of  gravity  of  the  whole  economic  fabric  from 
agriculture  to  industry;  and  on  the  other  hand,  by  the 
most  intense  concentration  of  forces,  undertakings,  and 
capital.  The  following  will  give  a  detailed  illustration: 

The  feverish  rapidity  of  the  economic  development 
during  the  period  in  question  must  be  attributed  above 
all  to  the  rapid  growth  of  the  population,  for  which  sus- 
tenance and  employment  had  to  be  found. 


The     German     Great    Banks 

The  population  in  1816  amounted  to  about  25,000,000; 
at  the  beginning  of  this  period  (1870),  to  over  40,000,000; 
and  in  1907  to  62,100,000  souls.  During  the  last  few 
years  it  has  increased  on  an  average  by  about  855,000 
souls  annually,  as  compared  with  an  annual  increase 
during  recent  years  of  about  373,000  in  England  and  of 
only  about  58,000  souls  in  France. 

It  should  be  emphasized  however  that  this  enormous 
increase  in  the  population  of  Germany  is  not  due  to  an 
increase  of  births,  which  have  decreased  in  proportion  to 
the  population  during  the  last  three  decades.  The  increase 
is  due  principally  to  the  very  considerable  decrease  in 
mortality,  i.e.,  owing  to  the  fact  that  as  a  result  of  improved 
hygienic  conditions  the  number  of  deaths  in  proportion 
to  the  population  has  decreased  far  more  rapidly  than  the 
number  of  births.7  Should  this  proportion  change,  an 
eventuality  bound  to  take  place  sooner  or  later,  and 
should  the  birth  figures  remain  stationary  or  decrease 
to  a  considerable  extent,  a  continuation  of  the  increase 
in  population  hitherto  recorded  is  out  of  question.  Added 
to  this,  the  excess  of  immigration,  which  occurred  for  the 
first  time  in  the  years  1895  to  1900,"  (and  which  still  con- 
tinues) may  change  again  into  an  excess  of  emigration 
which,  from  1871  to  1895,  amounted  to  about  2,500,000 
souls.  Finally,  the  increase  in  population  may  cease  or 
the  rate  of  increase  may  decline,  if  there  should  be  a 
decline  in  the  productivity  of  our  national  industry  which 
has  been  both  a  result  as  well  as  a  cause  of  the  increase  of 
population. 

At  the  beginning  of  this  period  (1871)  about  64  per  cent 
of  the  inhabitants  of  Germany  lived  in  the  country,  and 


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National    M on  et ar y     Commission 

about  36  per  cent  (as  compared  with  only  28.04  per  cent  in 
Prussia  in  1849)  in  the  towns.  In  1893,  however,  the 
percentage  of  country  and  town  population  was  almost 
equal,  and  in  1905  the  percentage  of  people  living  in  the 
country  amounted  to  42.58  per  cent  only,  whereas  the 
percentage  of  those  living  in  towns  had  risen  to  57.42  per 
cent  of  the  total  population.9 

According  to  the  census  of  professions,  trades,  and  occu- 
pations taken  June  14,  1895,  26,000,000,  or  42.7  per  cent 
of  the  population,  were  engaged  in  various  professions, 
trades,  and  occupations  10  (either  as  a  main  or  subsidiary 
means  of  gaining  a  livelihood)  (erwerbstdtig  im  Hauptund 
Nebenberuf.)  They  were  divided  as  follows : 

Of  the  total  number,  20,770,875,  or  40.12  per  cent  of  the 
entire  population,  were  engaged  in  various  professions, 
trades,  and  occupations  as  a  main  source  of  livelihood  (er- 
werbstdtig im  Hauptberuf) ,  as  compared  with  17,632,008, 
or  38.99  per  cent  of  the  entire  population,  in  1882. 

According  to  the  occupation  census  taken  on  the  i2th 
of  June,  1907,  the  main  results  of  which  were  published 
in  the  "  Reichsanzeiger  "  of  February  10,  1909,  No.  35,  the 
number  of  persons  thus  engaged  was  26,827,362,  or  43.46 
per  cent  of  the  entire  population.  These  figures  show  an 
increase  of  6,056,487,  or  29.16  per  cent,  as  compared  with 
1895,  whereas  the  increase  in  1895,  as  compared  with  1882, 
amounted  only  to  17.80  per  cent. 

The  population  of  the  chief  industrial  towns  n  had 
increased  to  an  extraordinary  extent  up  to  the  end  of  1905, 
in  comparison  with  the  years  1843  or  1849.  Thus,  for 
instance:  Aix-la-Chapelle  to  about  144,000,  as  compared 
with  about  46,000;  Chemnitz  to  about  241,000,  as  corn- 


The     German     Great    Banks 

pared  with  about  26,000;  Dortmund  to  about  175,000,  as 
compared  with  about  7,600;  Essen  to  about  229,000,  as 
compared  with  about  7,000;  Diisseldorf  to  about  253,000, 
as  compared  with  about  26,ooo.12 

At  the  beginning  of  the  period  under  consideration  there 
were  8  towns,  in  1905  as  many  as  41  towns,  with  over 
100,000  inhabitants.  Berlin,  which  about  the  middle  of 
the  nineteenth  century  numbered  less  than  500,000  inhabi- 
tants, in  1870,  774,000,  in  1880  not  quite  1,250,000,  and  in 
1890  about  i,5oo,ooo,13  has  passed  beyond  the  second 
million  since  December,  1904. 

As  stated  by  Ad.  Wagner,14  it  seems  at  the  present  time 
as  difficult  to  make  a  scientifically  incontestable  estimate 
of  German  national  wealth,  as  it  is  to  estimate  the  amount 
of  income  of  the  German  nation  or  its  annual  savings. 
A  brief  consideration  of  the  facts  will  make  this  clear. 

According  to  the  most  recent  calculation  made  (1908)  on 
the  basis  of  what  is  relatively  the  most  accurate  method, 
taking  as  basis  the  Prussian  supplementary  tax  (i.  e.,  a 
direct  property  tax) ,  the  wealth  of  Prussia  amounted  to 
130  billion  marks.  Taking  into  account15  the  proportion 
of  population  (3/5)  the  German  national  wealth  (given 
by  Mulhall  in  1895  in  his  " Dictionary  of  Statistics"  as 
£7,500,000,000=  150  billion  marks)  is  estimated  at  216  bil- 
lion marks,  or  to  avoid  exaggeration  at  200  billion  marks.16 
Two  years  earlier  (1906)  the  German  national  wealth  was 
estimated  by  Evert17  at  200  billion  marks,  by  Ballod18  in 
1908  at  251  to  266  billions,  by  Steinmann-Bucher  (i9o8)19 
at  even  314  billions;  and  in  a  recent  essay  ("350  Milli- 
arden  deutsches  Volkvermogen,"  Berlin  1909)  at  350  to  360 
billion  marks.  Thus  there  is  a  difference  of  no  less  than 


National    Monetary     Commission 

1 60  billion  marks20  between  the  highest  and  lowest  (200 
billion  to  360  billion  marks)  estimates  recently  made,  al- 
though most  of  them  were  based  upon  careful  and  con- 
servative calculations. 

Again,  the  result  of  the  Prussian  income  tax  assess- 
ment for  1907,  chosen  as  a  basis  for  estimating  the  Ger- 
man national  income,  gives  a  total  income  for  the  Prussian 
population  (1907)  of  17,990,000,000  marks  (11,747,000,000 
marks  for  taxpayers;  6,243,000,000  marks  for  nontax- 
payers).  Calculated  on  the  proportion  of  the  population 
this  would  result  in  a  German  national  income  of  25  to  30 
billion  marks,  and  an  annual  income  of  484  marks  per 
head  of  the  population.  These  figures,  however,  should 
be  used  with  great  reserve.21 

As  a  matter  of  fact  Steinmann-Bucher  calculates  the 
present  German  national  income  (in  his  book  "  350  Mil- 
Harden  deutsches  Volksvermogen,"  p.  102)  as  being  much 
higher,  namely,  35  billion  marks,  though  the  grounds  on 
which  he  bases  his  estimate  seem  inadequate. 

The  same  remarks  apply  to  any  estimate  of  the  annual 
German  savings,  i.  e.,  the  amounts  by  which  the  German 
national  wealth  is  annually  increased  from  the  German 
national  income.  This  amount  Schmoller  22  has  placed 
at  2 X  to  3  billion  marks,  and  it  has  been  calculated  by  the 
author  of  the  Grenzboten  article  already  mentioned  (p.  91) 
at  3.7  billion  marks  on  the  basis  of  an  average  annual 
increase  of  1,700,000,000  23  marks  in  the  value  of  property 
subject  to  the  Prussian  supplementary  tax. 

It  is  plain  that  the  same  objections,  or  other  no  less 
serious,  may  be  urged  against  all  estimates  for  foreign 


The     German     Great    Banks 

countries  which  have  been  made  according  to  any  of  the 
above  methods.24 

If,  however,  it  be  desired  to  give  merely  a  general  idea 
of  the  development  of  national  prosperity  in  Germany 
during  this  second  period,  it  may  be  pointed  out  among 
other  things  that  the  total  income  during  1907  of  all 
physical  persons  in  Prussia  (including  an  allowance  for 
non-taxpayers)  amounted  in  round  figures  to  16  billion 
marks  for  a  population  of  38,421,000,  while  in  1896  the 
total  income  of  these  persons  amounted  to  slightly  over 
10  billion  marks,  for  a  total  population  of  32,379,000. 
The  increase  of  income  was  thus  56  per  cent,  while  popu- 
lation increased  during  the  same  period  only  1 7  per  cent. 

The  amount  of  property  assessed  for  property  taxes  in 
1905  amounted  to  about  82,500,000,000  marks,  showing 
an  increase  of  17  per  cent,  as  compared  with  1899,  when 
it  amounted  to  70,000,000,000  marks.  The  figures  for 
the  other  German  Federated  States  show  a  similar 
development.25 

If  an  attempt  be  made  to  ascertain  the  amount  of 
German  national  wealth  invested  in  Bourse  securities 
(which  would  be  especially  appropriate  in  the  present 
volume),  equally  great  difficulties  will  be  experienced, 
despite  the  material  collected  in  regard  to  this  subject  on 
the  occasion  of  the  German  finance  reform  bills  of  I9o8.26 

If  the  table  compiled  in  the  report  of  the  Aeltesten 
der  Kaufmannschaft  von  Berlin  27  be  adopted,  in  which 
(according  to  the  market  report  of  June  30,  1906)  the 
nominal  and  market  values  of  the  securities  dealt  in  on 
the  Berlin  Bourse  were  estimated  at  about  92 y2  and  94^ 
billion  marks,  respectively,  it  is  evident  that  for  our 


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National     Monetary     Commission 

purpose  the  figures  are  too  high  in  one  regard  and  too 
low  in  another.  Too  high,  because  in  the  table  the  total 
of  securities  bearing  fixed  interest  includes  the  amounts 
withdrawn  from  the  market  during  1906  by  repayment; 
further,  because  it  does  not  contain  the  total  amount  of 
foreign  securities  in  German  hands,  but  only  the  amount 
of  foreign  securities  listed  at  the  Berlin  Bourse.  By  far 
the  larger  portion  of  these  securities,  however,  were  never 
in  German  hands,  as,  for  instance,  Russian  and  Argentine 
government  bonds,  as  well  as  Russian  and  American  rail- 
way securities.28  Another  part  of  these  securities,  such 
as  the  Italian,  Austrian,  and  Hungarian  state  securities, 
had  passed  or  returned  by  the  3oth  June,  1906,  from 
German  to  foreign  hands  (especially  to  the  countries  of 
their  origin)  in  consequence  of  conversions  or  of  foreign 
demand. 

On  the  other  hand,  the  results  obtained  by  accepting 
the  table  as  a  basis,  are  in  part  far  too  low,  as  many  of 
the  securities  are  not  quoted  on  the  Berlin  Bourse,  but 
on  other  German  exchanges.  Other  securities,  such  as  the 
debentures  of  small  industrial  undertakings,  are  not 
quoted  on  any  German  bourse. 

The  Deutscher  Oekonomist 29  endeavors  therefore  to 
solve  the  problem  in  a  different  manner.  It  starts 
with  the  supposition  that,  according  to  the  income-tax 
statistics  in  Prussia,  the  Prussian  income  derived  from 
capital  property  has  been  valued  (though  far  too  low) 
at  1,610,000,000  marks,  which,  capitalized  at  4  per  cent, 
corresponds  to  40,000,000,000  marks  for  Prussia, 
and  assumes  that  of  these  40,000,000,000  about 
20,000,000,000  are  invested  in  mortgages,  thus  leaving 


94 


The     German     Great    Banks 

a  balance  of  20,000,000,000  for  securities  invested  in 
Prussia,  and  accordingly  about  30,000,000,000  for  the 
whole  of  Germany. 

This  method  of  calculation  does  not  yield  indisputable 
results,  the  more  so,  because  no  statistics  exist  regarding 
the  total  mortgages  outstanding  in  Germany,  the  amount 
of  which  for  Prussia  is  estimated  at  20,000,000,000  marks. 
Thus  every  estimate  must  be  more  or  less  inaccurate. 
Moreover,  every  purely  schematic  application  of  Prussian 
to  German  general  conditions  is  improper. 

As  a  matter  of  fact  it  is  assumed  in  the  above-men- 
tioned supplementary  volumes  to  the  German  finance  re- 
form bill  of  1908  30  that  in  1907  the  German  public  held 
German  public  and  quasi-public  securities,  as  well  as 
mortgage  and  municipal  bonds  of  private  mortgage  banks, 
to  the  amount  of  about  35,500,000,000  marks;  industrial 
bonds  to  the  amount  of  2,500,000,000  marks,  and  shares 
of  an  actual  value  of  6,750,000,000  marks,  making  a  total 
of  44,750,000,000  marks  of  securities  in  German  hands, 
or  14,750,000,000  marks  more  than  the  above-mentioned 
estimate  of  the  whole  amount  of  securities  in  German 
hands. 

As  statistical  details  are  lacking  (especially  the  yield  of 
the  stamp  duties),  it  is  impossible  to  obtain  a  reliable 
estimate  31  of  German  investments  held  in  the  shape  of 
securities  of  all  kinds.  On  the  whole,  we  may  assume 
(on  the  strength  of  a  number  of  data)  that  at  least  one- 
third  of  the  national  wealth  is  invested  in  securities.32 
According  to  the  different  estimates  of  the  German  na- 
tional wealth  (200,000,000  to  360,000,000  marks:  see 
above,  pp.  91  and  92)  it  may  be  concluded  that  the 


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National    Monetary     Commission 

amount  is  between  66,000,000,000  and  120,000,000,000 
marks,  figures  which  present  a  wide  margin,  indeed.  A 
similar  conclusion  may  be  based  on  the  issue  statistics, 
which,  though  somewhat  incomplete,  tend  to  prove  that 
1,200,000,000  marks,  or  about  one-third  of  the  annual 
savings  of  the  nation,  is  invested  annually  in  securities. 

Grave  misgivings  have  been  expressed,  especially  by 
Ad.  Wagner,  regarding  the  tendencies  shown  by  the  de- 
velopment of  German  incomes  during  the  period  under 
consideration.  Wagner  finds  that  it  is  in  the  main  a 
development  along  plutocratic  lines  and  favoring  the 
interests  of  the  money  aristocracy,  and  he  seems  to  think 
that  the  entire  economic  development  of  Germany  is 
seriously  menaced  by  "  this  constantly  growing  concentra- 
tion of  income,  evidenced  not  only  in  the  case  of  some 
particularly  rich  persons,  but  also  by  a  constant  growth 
in  numbers  of  the  classes  occupying  a  high  and  even  the 
highest  place  in  the  economic  scale. ' '  33 

In  a  study,  breathing  a  high  spirit  of  patriotism,34  he 
has  lately  pointed  out  that  about  the  middle  of  the  nine- 
teenth century  there  were  only  about  100  persons  with  in- 
comes exceeding  100,000  marks  in  the  territory  correspond- 
ing to  the  confines  of  present-day  Prussia,  whereas  in  1891 
there  were  1,400  to  1,500,  in  1902,  2,800,  in  1905,  2,900, 
and  in  1907,  3,600  such  persons.  In  another  place  he 
states  that  the  national  wealth  and  national  income  have 
increased  out  of  all  proportion  in  favor  of  the  upper  and 
of  the  highest  classes,  and  not  inconsiderably  in  favor  of 
the  lower  classes  (especially  the  working  classes) ,  whereas 
the  large  middle  class  maintains  its  position  with  great 
difficulty  in  the  list  of  taxpayers,  and  (as  far  as  its  share 


96 


The     German     Great    Banks 

of  the  national  income  is  concerned)  is  falling  into  a  less 
favorable  position  from  day  to  day.35 

A  consideration  of  the  facts  will  show  that  none  of 
these  misgivings  can  be  deemed  justified  in  all  or  even  in 
their  main  points. 

In  my  opinion  (see  p.  113)  the  increase  in  the  number 
of  persons  with  incomes  exceeding  100,000  marks  in 
Prussia  (of  present  extent),  from  100  in  the  middle  of  the 
last  century  to  3,600  in  1907,  is  certainly  a  gratifying  proof 
of  our  economic  development.  But  if  we  consider  the 
enormous  growth  of  population  in  these  57  years,  the 
increase  of  such  incomes  does  not  seem  very  considerable, 
but  rather  (relatively  speaking)  inconsiderable. 

As  a  matter  of  fact,  a  smaller  growth  in  the  incomes 
exceeding  100,000  marks  might  have  suggested  serious 
misgivings  regarding  the  development  of  national  pros- 
perity, in  view  of  the  fact  that  during  these  sixty  years 
the  entire  standard  of  living,  the  entire  consumption, 
and  thus  the  household  budget  of  the  individual,  has  doubt- 
less increased  to  a  very  great  extent. 

After  all,  we  can  see  but  little  significance  in  the  fact 
that  it  is  just  the  uppermost  grade  of  taxpayers  (men- 
tioned by  Wagner)  which  has  considerably  increased 
compared  with  the  other  classes,  since  those  of  its  mem- 
bers who  become  wealthier  must  of  necessity  remain  in 
that  grade,  there  being  no  higher  grade  to  which  they 
could  be  transferred. 

Finally,  it  may  be  pointed  out  that  during  the  period 
under  discussion  the  number  of  those  persons  who  have 
been  moving  upward  from  a  lower  to  a  higher  tax  grade 36 
has  been  constantly  increasing;  further,  that  the  relative 

90311°— ii 8  97 


National     Monetary     Commission 

number  (in  proportion  to  the  population)  of  non-tax- 
payers (i.  e.,  persons  in  Prussia  with  incomes  below  900 
marks)  who  have  been  moving  upward  into  the  taxpaying 
class  during  this  period  has  also  been  constantly  on  the  in- 
crease.37 This  can  be  proved  in  detail.  According  to 
Schmoller,38  in  old  Prussia  the  number  of  persons  paying 
taxes  on  incomes  exceeding  3,000  marks  was  as  follows: 

Persons. 

1852 43, 489 

1867 72,  983 

In  Prussia  of  to-day: 

Persons. 

1873 123, 284 

1894 •  319,  317 

1902 449,  741 

This  shows,  certainly,  an  absolute  increase  in  the  number 
of  taxpayers  in  Prussia  (present-day  area)39  with  incomes 
above  3,000  marks  whose  total  taxable  income  (after  legal 
deductions)  has  risen  from  2,792,345,342  marks  in  1892 
to  5,156,245,432  marks  in  1907. 

On  the  other  hand,  the  income  of  persons  subject  to 
the  income  tax  in  Prussia  (present  area)  belonging  to  the 
lowest  grade  (incomes  between  900  marks  and  3,000 
marks)  has  risen  from  2,911,981,421  marks  in  1892  to 
6,591.553,725  marks  in  I907.40 

Between  the  years  1907  and  1908  the  group  paying  no 
income  tax  (incomes  below  900  marks)  decreased  in  the 
proportion  of  5,555  to  5,242;  the  number  of  taxpayers 
in  Prussia  (with  incomes  exceeding  900  marks)  increased 
19.5  per  cent  between  1892-93  and  1898-99,  whereas 
the  population  increased  during  the  same  period  only  8.2 
per  cent.41 


98 


The     German     Great    Banks 


Furthermore,  the  returns  of  the  Saxon  income  tax,  under 
which  until  1894  all  persons  receiving  a  minimum  income 
of  360  marks  were  liable  to  taxation,  give  the  following 
figures  for  every  100  persons  assessed: 


1879. 

1894. 

Less  than  3  oo  marks                 .  .  ..  . 

Per  cent. 
7  •  I 

Per  cent. 
5-  6 

76  3 

65   3 

20.  9 

31    i 

2     8 

5 

g 

That  is  to  say,  the  number  of  taxpayers  in  the  lowest 
grades  decreased,  and  the  number  belonging  to  the  other 
groups  increased  considerably.  Moreover,  the  -largest 
increase  during  the  period  mentioned  took  place  in  the 
middle  group  of  taxpayers  (800  to  3,300  marks),  supposed 
by  Ad.  Wagner  to  be  particularly  endangered.  Finally, 
the  total  taxable  income  of  physical  persons  in  Prussia 
has  increased  from  10,147,578,035  marks  in  1896  to  15,873,- 
774,007  in  1907. 

In  the  memorial  of  the  Admiralty,  dated  December, 
1905,  entitled  "Die  Entwicklung  der  deutschen  Seeinteres- 
sen  im  letzten  Jahrzehnt,"  proof  is  furnished  of  the  enor- 
mous upward  movement  of  incomes  in  Prussia,  in  which 
not  only  the  wealthy  classes  but  also  those  with  smaller 
incomes  participated  (900  to  3,000  marks)  almost  to  the 
same  extent.  The  increase  of  the  national  income  by  far 
exceeds  the  increase  of  population. 


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National    Monetary     Commission 


The  fact  that  the  classes  with  small  incomes,  which, 
by  the  way,  are  not  solely  composed  of  workingmen,  had 
a  large  share  in  this  upward  movement,  can  also  42  be 
proved  by  the  savings  bank  statistics. 

Of  the  9,000,000  savings  bankbooks43  in  existence  in 
Prussia  at  the  end  of  1901,  almost  one-quarter  were  for 
amounts  not  exceeding  60  marks,  about  one-seventh  for 
amounts  from  60  to  80  marks,  about  one-eighth  for 
amounts  from  150  to  300  marks,  and  only  one- thirtieth 
for  amounts  above  3,000  marks  (at  this  stage  depositors 
begin  to  invest  their  savings  in  securities.) . 

The  number  of  savings  bank  books  grew  as  follows : 44 


Location. 

Year. 

Books. 

Per  100  in- 
habitants. 

Per  cent. 

Wurttetnberg 

1891 

1896 

424.  500 

20.3 

Prussia 

1882 

1897 

7,  643,  ooo 

23-4 

1904 

10,  211,  976 

27.  71 

1906 

11,095,  276 

29.24 

This  number  had  doubled  in  Prussia  during  the  time 
from  1882  to  1897  and  trebled  up  to  the  end  of  1906. 
The  savings  bank  deposits  totaled  as  follows : 


Location. 

Year. 

Amount. 

Marks. 

Wurtternberg 

1896 

190,  ooo,  ooo 

Prussia  _  

1882 

1897 

4,  967,  ooo,  ooo 

1904 

7,  762,  ooo,  ooo 

1906 

8,  788,  ooo,  ooo 

1907 

9,  121,  OOO,  OOO 

The     German     Great    Banks 

These  deposits  had  almost  trebled  in  Prussia  between 
1882  and  1906,  and  were  more  than  five-fold  at  the  end  of 
1907.  In  1882  every  eighth  inhabitant  of  Prussia  pos- 
sessed a  savings  bank  book,  and  at  the  end  of  1901  every 
fourth  inhabitant.  The  amount  of  deposits  increased  in 
the  German  Empire  from  about  1,869,000,000  marks  in 
1875  to  13,889,000,000  marks  in  1907,  which  denotes  an 
increase  during  these  thirty-three  years  of  643.05  per  cent. 
From  1883  to  1907,  or  in  twenty-five  years,  the  deposits 
have  increased  from  3,187,000,000  marks  to  13,889,000,000 
marks,  or  four  and  a  quarter  times. 

Between  1883  and  1908,  the  deposits  in  the  German 
credit  banks  have  also  increased  considerably;  in  credit 
banks  particularly,  with  a  minimum  capital  of  i  ,000,000 
marks  each  (which  are  of  greater  importance  for  the  de- 
posit business  45),  they  rose  from  about  498,000,000  marks 
at  the  end  of  1883  to  about  2,746,000,000  marks  at  the 
end  of  1908,  an  increase  during  these  twenty-six  years  of 
more  than  four  and  a  half  times. 

It  may  be  assumed  that  the  greater  portion  of  these 
bank  deposits,  about  two-thirds,  consists  of  working 
reserves  of  manufacturers  and  traders  (doubtless  includ- 
ing also  the  smaller  ones),  and  of  funds  of  capitalists  de- 
posited temporarily,  but  destined  for  investment  in  secu- 
rities, mortgages,  etc.,  and  that  only  the  smaller  part 
(about  one-third)  represents  savings  deposits  proper. 

The  annual  increase  of  the  savings  deposited  with  the 
16,092  German  cooperative  credit  societies  (on  January  i, 
1908)  was  estimated  at  225,000,000  marks.46  The  ma- 
jority of  the  members  belong  most  probably  to  the  clasr 
of  the  smaller  and  smallest  tradesmen. 


National    Monetary     Commission 

German  foreign  trade  (i.  e.,  special  imports  and  exports) 
according  to  the  memorial  of  the  admiralty  dated  Decem- 
ber, 1905,  entitled  Die  Entwicklung  der  deutschen  Seein- 
teressen  im  letzten  Jahrzehnt,  rose  from  7,300,000,000 
marks  to  12,200,000,000  marks  in  the  decade  from  1894 
to  1904;  the  increase  in  weight  was  60  per  cent,  and  in 
value  66  per  cent. 

During  this  period  the*  special  trade  of  England  in- 
creased 38  per  cent,  that  of  the  United  States  59  per 
cent,  that  of  France  28  per  cent,  and  that  of  Russia  23 
per  cent.  Within  the  last  twenty -five  years  German  trade 
has  exactly  doubled.47 

The  total  number  of  establishments  in  trade  and  indus- 
try amounted,  according  to  the  census  taken  in  1895,  to 
over  3,000,000,  in  which  about  10,225,000  persons  were 
at  work. 

Of  these  3,000,000  establishments,  nine-tenths — with 
about  4,750,000  persons  only — were  small  establishments, 
as  against  only  19,000  large  establishments,  with  over  50 
persons  each;  the  latter,  however,  gave  occupation  to  about 
3,000,000  persons,  or  almost  to  30  per  cent  of  all  persons 
engaged  in  trade  and  industry.  As  compared  with  the 
census  of  1882,  the  proportion  of  large  establishments  to 
middle-sized  and  small  establishments  in  i895/8  had 
increased  28.3  per  cent  in  the  mining  and  foundry  in- 
dustries, 3.6  per  cent  in  the  chemical  industries,  and  2.2 
per  cent  in  the  industry  of  illuminants. 

By  far  the  majority  of  the  19,000  large  establishments 
with  about  3,000,000  persons  belonged  to  industry  proper. 

The  average  number  of  workmen,  clerks,  and  other 
employees  belonging  to  the  trade  insurance  associations 


102 


The     German     Great    Banks 

(Berufsgenossenschaften)  in  commerce  and  industry  was, 

in  round  figures,  as  follows: 

1886 3, 467. 00° 

1895  5, 341, ooo 

1905 8,  036,  ooo 

There  were  124,074  steam  engines  (not  including  those 
used  in  agriculture  and  forestry)  with  7,587,650  horse- 
power49 at  work  in  the  German  Empire  in  1907,  which, 
if  the  effective  horsepower  of  a  machine  during  a  normal 
working  day  is  computed  as  equivalent  to  the  labor- 
power  of  10  men,  replaced  the  work  of  75,000,000  men. 

Of  these  124,074  (7,587,650  IP)  steam  engines,  27,921 
(3,065,223  IP)  belonged  to  the  mining  and  foundry 
industries;  the  textile  industry  employed  11,039  steam 
engines  (934,763  IP)  and  the  machine  industry  8,066 
(891,088  IP)  steam  engines. 

According  to  the  occupation  census  of  1895  the  whole 
population  of  Germany  was  divided  as  follows:  Agricul- 
ture, 35.74  per  cent;  industry  and  mining,  39.1  per  cent; 
trade  and  transportation,  11.5  per  cent.  For  Prussia  alone 
the  following  comparative  data  may  be  given:50 


1843. 

1895- 

1907. 

Ptr  cent. 
60.  84-61.  34 

Per  cent. 

36.  12 

Per  cent. 
28.  59 

Industry  and  mining  

23-37 

•  97 

38.73 

1  1.  39 

42.  76 
13.  17 

The  population  of  the  Empire  engaged  in  agriculture 
and  forestry,  which  still  numbered  19,250,000  persons  in 
1882  (19,225,455  souls,  or  42. 5  per  cent  of  the  population), 
decreased  in  the  thirteen  years  following  (1882-1895),  to 
18,500,000  (18,501,307  souls,  or  35.8  per  cent),  the  whole 


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National    Monetary     Commission 


population  increasing  during  the  same  period  14.48  per 
cent;  that  is  to  say,  the  decrease  in  agricultural  popula- 
tion amounted  to  about  700,000  persons,  or  3.77  per  cent 
of  the  total  population.  Although  the  number  of  farms 
(landwirtschaftliche  Betriebe)  and  the  area  utilised  for  agri- 
culture increased  constantly  during  the  thirteen  years  in 
question,  the  number  of  agricultural  laborers  diminished 
by  over  254,000  persons. 

During  the  same  period  (1882-1895),  the  industrial 
population  increased  26.12  per  cent,  and  the  commercial 
population  as  much  as  31.62  per  cent. 

Thus  even  the  census  of  1882  had  made  it  evident 
that  a  reversal  had  taken  place;  the  industrial  minority 
of  former  times  had  become  a  majority,  and  the  former 
agricultural  majority  had  been  turned  into  a  minority. 
According  to  the  census  taken  on  June  12,  1907  ("  Reichs- 
anzeiger"  of  February  10,  1909,  No.  35),  this  condition 
has  become  very  much  more  pronounced. 

The  total  number  of  persons  engaged  in  agriculture 
(those  making  agriculture  their  main  occupation,  includ- 
ing house  servants,  and  members  of  the  family)  has  de- 
creased still  further,  the  number  being  17,681,176  souls. 

Of  the  entire  population  of  the  German  Empire  in  1882, 
1895,  and  1907  the  distribution  of  the  total  population 
by  occupations  showed  the  following  percentages: 


1882. 

1895- 

1907. 

Agriculture  (including  gardening,  stock  breeding, 
forestry,  and  fisheries)  ... 

Per  cent. 
42   5 

Per  cent. 
35   8 

Per  cent. 
28  6 

Industry  (including  mining  and  the  building  trades)  . 
Trade  and  traffic  (including  innkeeping  and  tavern 
keeping)  

33-5 

39-1 

42.8 

104 


The     German     Great    Banks 

The  distribution  by  occupations  of  the  population  en- 
gaged in  gainful  occupations  in  the  German  Empire  in 
1882,  1895,  and  1907  is  shown  in  the  following  table: 


1882. 

1895. 

1907. 

Agriculture  (including  gardening,  stock  breeding, 

Per  cent. 

Per  cent. 

Per  cent. 

forestry,  and  fisheries)  

43-4 

36.2 

32.  7 

Industry  (including  the  mining  and  building  trades)  . 

33-7 

36.1 

37-2 

Trade  and  traffic  (including  inn  keeping  and  tavern 

keeping)                                  

8.3 

IO.  2 

ii   5 

Thus  on  the  basis  of  the  statistics  of  occupations  it  may 
be  stated  with  perfect  assurance  (with  certain  reserva- 
tions to  be  set  forth  presently) ,  that  of  the  German  popu- 
lation more  than  two-thirds  are  no  longer  employed  in 
agriculture.51  It  would,  however,  be  entirely  one-sided 
and  incorrect  (as  has  been  pointed  out  by  Oldenburg, 
Ballod,  and  especially  by  Traugott  Muller,  in  a  highly 
instructive  article52)  to  infer  from  these  facts  that  Ger- 
man agriculture  is  on  the  decline,  and  that  Germany's 
sole  salvation  lies  in  industry,  especially  in  the  export 
industry. 

It  has  already  been  mentioned  53  that  both  the  number 
of  farms  (landwirtschaftliche  Betriebe)  and  the  area  devoted 
to  agriculture,54  have  increased  during  this  period;  and 
the  same  applies  on  the  whole  to  stock  raising,55  as  well 
as  to  almost  all  agricultural  productions,  especially  those  of 
fodder  and  potatoes.  This  increase  was  due  chiefly  to  the 
steady  improvement  in  the  systems  of  culture  and  meth- 
ods of  work,  as  well  as  to  the  constantly  growing  employ- 
ment of  machinery  driven  by  steam  and  electric  power. 
Between  1882  and  189 5,  for  example,  the  number  of  steam 
plows  in  use  increased  from  836  to  i  ,696.  and  the  number 


105 


National     Monetary     Commission 

of  steam  thrashing-machines  from  75,690  to  259,364.  On 
the  other  hand,  the  number  of  large  distilleries  increased 
fivefold  since  1870  in  the  districts  east  of  the  Elbe 
(according  to  K.  Lamprecht,  op.  cit.,  p.  187),  in  conse- 
quence of  the  introduction  of  the  high-pressure  boiler  for 
steaming  potatoes. 

The  intensity  of  agricultural  cultivation  has  also  grown 
considerably,  and  likewise  almost  without  exception  the 
average  crop  yields.  Thus,  if  the  period  from  1879-1888 
be  compared  with  the  year  1899,  an  increase  will  be  found 
to  have  taken  place  in  the  case  of  rye  from  980  to  i  ,490 
kilograms  per  hectare,  in  the  case  of  oats  from  1,140  to 
1,720,  and  of  potatoes  from  8,100  to  12,290  kilograms. 

According  to  Ballod's  essay  on  the  economic  develop- 
ment of  Germany  since  1870,  the  home  production  of  all 
sorts  of  grains  increased  within  the  last  two  decades  about 
36  per  cent,  whereas  the  population  increased  only  about 
1 8  per  cent. 

The  net  proceeds,  however — that  is  to  say,  the  profit- 
ableness of  agricultural  undertakings,  fell  considerably 
in  many  parts  of  Germany  mainly  because  of  the  great 
increase  in  the  domestic  cost  of  production,  and  of  foreign 
competition  having  the  advantage  of  lower  cost  of  pro- 
duction, and  cheap  transportation  by  land  and  sea.  An 
improvement  in  this  regard  has  been  noted  only  during 
the  last  few  years,  due  in  part  to  the  greatly  increased 
duties  on  agricultural  products  put  in  force  by  the  latest 
commercial  treaties.  Until  then,  much  to  the  detriment 
of  the  general  economic  interests  in  large  parts  of  Ger- 
many, the  condition  of  agriculture,  affected  as  it  was  by 
a  heavy  fall  in  the  prices  of  its  chief  products,56  and  the 


106 


The     German     Great    Bank 


growing  encumbrances  on  landed  property,57  had  become 
quite  precarious.  This  condition,  naturally,  influenced  the 
amount  of  agricultural  production  58  and,  considering  the 
great  influence  of  agriculturists  on  the  politics  and  legis- 
lation of  Germany,  brought  about — in  some  cases  unnec- 
essarily— results  detrimental  to  other  classes,  without 
simultaneous  advantages  desired  for  and  by  agriculture. 

Finally,  certain  improvements  in  the  agricultural  credit 
system  were  introduced,  partly  by  state  aid,  as  in  Prussia 
by  the  foundation  of  the  Prussian  Zentral-Genossenschafts- 
kasse  (Central  Bank  for  Cooperative  Societies)  (1895)  and 
partly  through  the  establishment  of  "  Raiffeisen"  loan 
societies,  and  the  Schultze-Delitzsch  loan  and  credit  socie- 
ties. In  this  direction,  i.  e.,  of  cooperative  effort,  much 
remains  to  be  done.  The  granting  of  credit  by  the  Reichs- 
bank,  which  in  view  of  its  own  short-term  obligations 
may  grant  short  credit  only,  can  be  depended  on  by 
agriculturists  only  in  exceptional  cases  in  view  of  the 
greater  length  of  time  occupied  by  the  process  of  agri- 
cultural production.  Agriculture  requires  a  system  of 
credit  adapted  to  its  peculiar  conditions  of  production.  A 
permanent  organisation  for  this  purpose  would  benefit 
agriculture  as  much  as  the  community  at  large,  since  the 
common  good  requires  that  not  only  the  interests  of  the 
consumer  but  also  those  of  the  producer  be  guarded. 

In  other  directions,  too,  the  injudicious  use  of  the' above 
data  (see  pp.  104  to  106)  may  lead  to  false  conclusions. 

In  the  first  place,  we  must  not  lose  sight  of  the  fact  that 
a  considerable  amount  of  economic  activity  which  in 
our  statistics  is  classed  under  the  head  of  industry  is 
either  largely  of  an  agricultural  nature,  for  instance,  the 


107 


National    Monetary     Commission 

manufacture  of  beet  sugar  and  starch,  distilling,  brewing, 
milling,  etc.,  or  else  closely  connected  with  agriculture, 
such  as  baking,  butchering,  the  manufacture  of  food  and 
drinks,  brickmaking,  etc.59  It  must  also  be  borne  in  mind 
that  our  statistics  do  not  take  into  account  those  persons 
who,  in  addition  to  their  main  occupation  were  engaged 
in  agriculture  as  a  secondary  occupation.  According  to 
Troeltsch  (loc.  cit.  p.  121),  the  number  of  such  persons 
in  1905  amounted  to  3,700,000. 

Further,  it  must  be  remembered  that  although  between 
1882  and  1895  the  number  of  independent  producers  in 
agriculture  increased  by  2.9  per  1,000,  the  number  of  de- 
pendent workers  (abhdngige  Arbeiter)  decreased  16.1  per 
1,000  during  the  same  period,  the  agricultural  labourers 
having  turned  to  other  occupations,  mostly  industrial, 
without  returning  and  without  being  replaced.60 

Finally,  the  period  under  consideration  witnessed  the 
completion  of  a  movement  which  set  in  during  the  earlier 
economic  period  (1848-1870),  namely,  the  gradual  devel- 
opment into  independent  branches  of  industry  of  a  whole 
1  series  of  occupations,  such  as  spinning  and  weaving,  origi- 
nally carried  on  as  homework  in  the  country,  and  there- 
fore classified  under  the  heading  of  agriculture.  These 
occupations  no  longer  center  in  the  country. 

In  this  manner  the  number  of  persons  occupied  in 
agriculture  decreased  statistically,  without  an  actual  de- 
cline of  agriculture  as  such,  and  without  a  decrease  of 
the  number  of  persons  actually  employed  in  agricultural 
pursuits.61 

Care  should  therefore  be  taken  not  to  overstretch  the 
conclusions  drawn  from  the  figures  showing  the  per 

108 


The     German     Great    Banks 

centage  (seepages  104  and  105)  of  persons  in  Germany  fol- 
lowing agricultural,  industrial,  and  trade  pursuits,  nor  to 
pit  against  each  other  too  sharply  the  two  expressions 
"agrarian  state"  and  ''industrial  state,"  which  as  the 
result  of  indiscriminate  use  are  assuming  more  and  more 
the  character  of  dangerous  catchwords,  suggesting  that  the 
two  economic  stages  thus  designated  are  essentially  antago- 
nistic. It  is  only  by  avoiding  these  errors  that  a  proper 
appreciation  can  be  gained  of  the  share  of  German  agri- 
culture in  the  national  wealth  and  production,  in  fact  in 
the  entire  economic  life  of  Germany. 

All  these  considerations,  however,  do  not  impair  the 
correctness  of  the  above  statement  (p.  88),  namely,  that 
the  center  of  German  economic  life  has  been  shifted  more 
and  more  from  agriculture  to  industry.62  The  causes  of 
this  fact  are  of  very  varied  nature. 

The  larger  the  growth  and  the  rate  of  growth  of  the 
German  population,  the  less  German  agriculture  was  able 
to  employ  and  sustain  it. 

It  is  true  that,  until  the  beginning  of  the  period  under 
consideration,  German  agriculturists  exported  consider- 
ably more  of  their  products  (especially  grain,  with  the 
exception  of  rye),  mainly  to  England,  France,  Holland, 
and  Switzerland,  than  was  imported  from  foreign  coun- 
tries.63 It  is  also  an  established  fact  that  during  the  period 
in  question  the  necessity  of  exchanging  German  manufac- 
tured products  64  for  foreign  products  of  the  soil  (more 
especially  wheat  and  vegetal  raw  materials)  became  more 
and  more  pronounced.  Furthermore,  agriculture,  despite 
great  efforts  and  successes,  was  not  able  to  increase  in  the 
same  proportion  and  with  the  same  rapidity  as  the  popu- 


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National    Monetary     Commission 

lation.  The  deficit  in  agricultural  production  thus  en- 
tailed, which  despite  all  protective  duties  amounted  as  far 
back  as  1898  to  over  2,000,000,000  marks  per  annum,  had 
consequently  to  be  met  by  importation  from  abroad. 

Similarly,  German  manufacturers  were  quite  unable  to 
satisfy  their  requirements  at  home,  especially  of  raw  ma- 
terials, as  the  required  raw  products  are  not  to  be  had  at 
all  in  Germany,  or,  if  the  colonies  be  taken  into  account, 
only  in  insignificant  quantities.  Consequently  a  large 
portion,  in  some  cases  the  largest  portion  of  the  require- 
ments of  German  industry,  has  to  be  procured  by  imports 
from  abroad.  The  most  striking  instance  of  this  is  fur- 
nished by  the  textile  industry  occupying  the  first  place 
in  Germany's  export  trade,  which  has  to  obtain  from 
abroad  about  nine- tenths  of  its  raw  materials  (cotton, 
jute,  silk).65 

The  annual  import  requirements  of  foods  and  delica- 
cies, cattle  as  well  as  raw  materials,  and  half -manufac- 
tured goods  necessary  in  German  agriculture  and  industry 
for  further  manufacture,  or  for  direct  use,  could  not  be 
paid  out  of  German  national  capital  (Nationalvermogeri) 
unless  the  nation  was  to  be  gradually  impoverished ;  pay- 
ment had  to  be  made  in  another  way. 

An  inconsiderable  part  of  this  payment  is  made  to 
foreign  countries  in  such  German  home-grown  raw  mate- 
rials as  are  not  needed  for  home  use.  The  greater  part  of 
the  payment,  however,  is  made  in  manufactured  goods 
supplied  to  foreign  countries  which  import  into  Germany 
food  and  raw  materials,  or,  in  other  words,  in  exporting 
the  results  of  German  home  labor  in  return  for  foreign 
products  of  the  soil.06  These  manufactured  goods  consist 


The     German     Great    Banks 


principally  of  woollen  and  cotton  manufactures,  sugar, 
machines,  silk  goods,  coarse  iron  manufactures,  chemical 
products,  etc. 

In  1908  by  far  the  larger  part  of  our  special  exports 
consisted  of  manufactured  goods,  namely,  65  per  cent. 
Raw  material  exported  amounted  to  only  25  per  cent, 
foods  and  delicacies  to  10  per  cent. 

The  "industrialisation"  thus  characterized  caused  in 
the  first  instance  by  an  increased  population  that  had 
to  be  fed  and  employed,  in  its  turn  became  the  cause 
of  a  further  increase  of  the  population.  It  was  intensified 
by  the  circumstance  that  simultaneously  the  indiistrial 
demand  for  means  of  production  was  constantly  growing 
through  "the  displacement  of  organic  by  inorganic  mat- 
ter," as  Sombart  has  pregnantly  characterized  this 
recent  technical  development. 

The  tree  of  the  forest  has  to  make  room  for  the  iron 
girder  for  building  purposes,  and  is  replaced  by  coal  for 
purposes  of  fuel.  Animal  manure  and  animal  labor  are 
being  displaced  by  chemical  fertilizers  (ground  Thomas 
slag,  potash,  Chile  saltpeter,  etc.),  by  steam  engines,  and 
electric  motors;  through  the  discovery  of  aniline  dyes 
fields  sown  in  madder  became  free  for  other  cultures. 

At  the  end  of  1907  the  special  exports  from  the  German 
Customs  Union  amounted  to  nearly  6.4  billion  marks 
(6,389,860,000),  and  the  special  imports  to  about  8  billion 
marks  (7, 664,000,000) °7,  whereas  exports  from  the  Ger- 
man Customs  Union  between  1842-1846  averaged,  accord- 
ing to  K.  H.  Rau,  about  510,000,000  marks  and  imports 
about  630,000,000  marks,68 


National    M on  et ar y     Commission 

The  excess  of  imports  for  home  consumption  into  Ger- 
many at  the  end  of  1907  (more  than  half  of  which  came 
from  Great  Britain,  the  United  States,  Austria-Hungary, 
and  Russia)  over  German  domestic  exports  (almost  half 
of  which  were  sent  to  the  above-mentioned  countries), 
or  our  adverse  trade  balance  (Warenverkehrsbilanz) , 
amounted  thus  to  almost  1,300,000,000  marks  (1895: 
800,000,000) . 

It  will  be  found,  however,69  on  comparing  the  import 
and  export  figures  of  1907  with  those  of  1882,  that  on  the 
whole  the  imports  of  1907  have  increased  proportionately 
much  more  than  the  exports.70  Of  raw  materials  and 
half -manufactured  goods  the  imports  increased  200.1  per 
cent;  and  the  exports  only  77.5  per  cent.  Of  manufac- 
tured goods  the  imports  increased  222.1  per  cent;  and  the 
exports  only  183  per  cent.  The  opposite  tendency  may 
be  noted  for  the  period  before  1882,  when  the  growth  of 
imports  was  on  the  whole  smaller  than  the  growth  of 
exports. 

Further,  commencing  with  1882,  it  will  be  found  that, 
on  the  whole,  the  quantities  of  manufactured  goods 
exported  have  formed  a  constantly  decreasing  portion  of 
the  total  German  industrial  production. 

Finally,  it  will  be  found  that  the  increase  in  German 
'  industrial  production  (in  the  most  important  branches) 
was  greater  after  1882  than  the  increase  in  the  average 
number  of  persons  employed;  that  since  1885  the  increase 
in  the  number  of  gainfully  employed  persons  has  been 
greater  than  the  increase  of  the  general  population,  and 
on  the  whole  71  greater  than  the  increase  of  production 
and  of  the  quantity  and  value  of  the  exports. 


112 


The     German     Great    B 


a  n 


All  these  factors  warrant  the  conclusion  that  since 
about  the  beginning  of  the  eighties  the  consuming  power 
of  the  German  nation,  i.  e.,  the  home  market,  developed 
more  speedily  and  vigorously  than  the  foreign  markets.72 

It  can  scarcely  be  doubted  that  this  was  due  to  the 
greater  accumulation  of  capital  during  the  same  period — 
that  is  to  say,  to  the  growing  development  of  national 
prosperity. 

This  growth  raised  the  productive  power  of  the  indus- 
trial population  on  the  one  hand,  and  the  purchasing 
power  of  the  nation  on  the  other,  allowing  at  the  same 
time  a  portion  of  the  added  available  means  to  be  utilized 
for  the  improvement  of  the  German  balance  of  payments. 

This  improvement  of  the  German  balance  of  payments 
has  been  caused  during  the  last  twenty-five  years,  espe- 
cially through  the  acquisition  of  foreign  securities,  which 
rendered  foreign  countries  "tributary"  to  Germany  in  so 
far  as  they  had  to  pay  her  interest.  Additional  improve- 
ments have  been  brought  about  by  the  granting  of  long 
and  short  term  credit  to  foreign  countries,  by  the  consid- 
erable growth  of  Germany's  shipping,  and  by  her  partici- 
pation in  foreign  undertakings.  The  necessity  and  the 
benefit  of  these  improvements,  especially  of  the  last 
named,  will  form  the  subject  of  a  special  chapter  (Sec. 
VII  of  this  part). 

There  can  be  no  doubt,  however,  that  an  unfavorable 
trade  balance  (Passimtat  der  Wirtschaftsbilanz)  of  a 
country  is  the  less  dangerous  the  more  favorable  its  bal- 
ance of  payments,  for  it  can  then  more  easily  afford  to  let 
other  countries  "work  for  it"  and  supply  it  with  raw 
material  and  food. 


90311°— n 9  113 


National    Monetary     Commission 

During  the  last  few  years  there  have  been  noticed  cer- 
tain though  not  absolutely  indisputable  indications  that 
the  German  balance  of  payments,  while  not  unfavorable 
throughout,  yet  evinces  a  certain  tendency  in  that  direc- 
tion.73 This  should  serve  as  a  warning  to  utilize  the  in- 
creasing accumulation  of  capital  primarily,  and  to  a  greater 
degree  than  hitherto,  for  the  strengthening  of  the  home 
market ;  or,  in  other  words,  to  increase  home  production  and 
purchasing  power,  particularly  the  agricultural  production 
of  foodstuffs  and  our  colonial  production  of  raw  materials, 
and  to  employ  our  surplus  funds  only  secondarily  in 
the  service  of  so-called  "  export  capitalism." 74 

Industrial,  commercial,  and  banking  circles  must  not 
forget  that  the  strengthening  of  agriculture  and  its  ca- 
pacity for  absorbing  industrial  products  forms  one  of  the 
most  indispensable  means  of  strengthening  the  entire 
home  market;  on  the  other  hand,  the  agricultural  inter- 
ests should  not  overlook  the  fact  that  the  most  careful 
fostering  of  the  export  industry,  within  the  limits  essential 
for  the  strengthening  of  the  home  market,  is  in  turn 
demanded  in  the  interests  of  national  economy. 

In  my  opinion  the  inferences  to  be  drawn  from  the 
above  for  the  German  credit  banks  are  clear.  As  re- 
gards the  past,  they  have  rendered  effective  service  in 
promoting  the  development  of  the  national  economic 
forces  by  participating  to  a  considerable  extent  in  the 
strengthening  of  the  home  market,  by  increasing  the 
productiveness  and  purchasing  power  of  the  nation, 
and  by  sharing  in  the  above-described  (p.  113)  improve- 
ments of  the  German  balance  of  payments.  The  favor- 
able effects  of  the  activity  of  the  credit  banks  should  be 


114 


The     German     Great    Banks 


admitted  even  by  those  persons  who,  in  a  spirit  of  exag- 
geration, hold  the  German  credit  banks  responsible  for 
everything  unfavorable  that  has  happened  in  the  indus- 
trial and  commercial  development  of  Germany. 

On  the  other  hand,  as  regards  the  future,  the  German 
credit  bank?  must  aim  at  restraining  ''export  capitalism" 
still  further  than  has  been  the  case  hitherto,  particularly 
during  the  last  few  years,  more  especially  at  times  when 
the  home  market  according  to  all  indications  stands  in 
need  of  available  home  capital. 

Furthermore,  as  far  as  it  is  practicable  and  in  conformity 
with  Germany's  international  economic  and  financial 
relations,  they  will  have  to  shape  the  forms  in  which 
export  capitalism  is  to  operate,  especially  by  fixing  the 
dates  of  issue  of  foreign  securities  and  the  rates  of 
interest  with  due  regard  to  the  interests  of  national 
economy,  and  of  the  domestic  money  and  capital  market. 

We  shall  resume  now  our  review  of  the  economic  con- 
ditions of  the  period  under  consideration. 

As  far  as  the  formation  of  joint  stock  companies  was 
concerned  (vide,  p.  38)  only  102  companies,  with  a 
total  capital  of  about  638,000,000  marks  were  founded 
during  the  twenty-four  years  between  1826-1850  as  com- 
pared with  295  companies,  with  a  total  capital  of  about 
2,404,760,000  marks,  founded  between  1851  and  the  first 
six  months  of  1870.  At  the  end  of  1908  the  total  number 
of  companies  founded  in  the  German  Empire  since  1871 
(including  undertakings  that  had  been  transformed  into 
joint  stock  companies)  amounted  to  6,249,  with  a  share 
capital  of  9,439,530,000  marks  (vide,  p.  119),  or  about 
billion  marks.  These  figures  do  not  include  the  large 


National    Monetary     Commission 

number  of  limited  liability  partnerships  that  had  been 
established  during  the  same  period.  During  the  years 
1867-1873  no  fewer  than  1,005  German  stock  companies 
were  licensed,  and  682  were  newly  formed.  From  the 
second  half  of  1870  to  1874  there  were  founded  857  com- 
panies with  a  joint  stock  capital  of  3,306,810,000  marks. 

The  sudden  influx  of  the  5  billion  francs  of  French  war 
indemnity  caused  a  great  abundance  of  money  which  let 
loose  a  veritable  rage  of  speculation  and  enterprise.  This 
overproduction  of  new  undertakings,  just  as  in  1857,  was 
one  of  the  main  causes  of  the  crisis  of  1873.  By  Sep- 
tember, 1874,  out  of  the  above  857  companies,  no  fewer 
than  123  were  in  process  of  liquidation  and  37  in  the 
hands  of  receivers.75 

As  compared  with  the  capital  stock  of  the  companies 
founded  between  1851  and  1870,  the  amount  of  capital  of 
the  stock  companies  founded  in  the  principal  trades  and 
industries  between  1870  and  1874  shows  the  following 
increases : 76 

Building  trades,  about  twenty  -  seven  -  fold  (from 
17,420,000  marks  to  486,640,000) ;  brewing,  about  twenty- 
four-fold;  stones  and  earths,  about  nineteenf old ;  banking, 
about  ninefold  (from  94,650,000  marks  to  838,270,000 
marks) ;  metal  working  and  machine  construction,  about 
sevenfold;  agriculture,  about  fivefold;  chemicals,  fuel 
materials  and  illuminants,  about  fourfold,  and  sugar 
manufacturing,  about  twofold. 

In  the  mining  industry,  not  mentioned  in  the  above  list, 
the  number  of  companies  founded  between  1870  and  1874 
was  also  quite  considerable.  In  fact,  as  regards  the  abso- 
lute amount  of  capital  newly  invested  during  these  years, 


116 


The     German     Great    Banks 

394,950,000  marks,  this  industry  takes  front  rank.77 
But  inasmuch  as  the  share  capital  newly  invested  in  this 
industry  between  the  years  of  1851  and  1870  reached  the 
large  total  of  275,310,000  marks,  the  increase  during  the 
following  period  does  not  appear  so  striking. 

As  the  German  railway  system  had  already  been  con- 
structed to  a  considerable  extent  by  the  end  of  the  for- 
mer period  (1851-1870),  the  capital  of  newly  created  rail- 
way companies  was  considerably  smaller  in  1870-1874 
(778,000,000  marks)  than  in  1851  to  1870  (1,722,000,000 
marks) . 

In  1883,  1,311  joint-stock  companies  published  their 
balance-sheets,  showing  a  capital  of  about  3,918,000,000 
marks.  Among  these,  128  companies  (or  about  one-tenth 
of  the  total  number)  with  a  capital  of  571,250,000  marks 
(or  about  one-seventh  of  the  total  capital)  belonged  to 
the  mining  industry.78 

During  the  subsequent  period,  the  years  1889  and  1890, 
which  were  years  of  great  industrial  prosperity,  are  most 
notable  for  the  large  number  of  company  flotations. 

In  1896  there  were  3,712  joint-stock  companies  with  a 
paid-up  capital  of  6,845, 760,000 79  marks. 

Their  distribution80  was  as  follows:  235  mining  and 
foundry  companies  with  a  capital  of  1,022,330,000  marks 
(or,  including  loans  and  reserves,  1,381,860,000  marks); 
235  machine-building  companies,81  with  a  total  capital  of 
324,720,000  marks;  259  textile-industry  companies,  with 
a  capital  of  414,910,000  marks;  378  brewing  82  companies, 
with  a  capital  of  367,200,000  marks;  164  building  com- 
panies, with  a  capital  of  172,760,000  marks;  98  banking 
companies,  each  with  a  capital  of  more  than  1,000,000 


117 


National    Monetary     Commission 

marks,  and  a  total  capital  of  1,240,300,000  marks;  108 
companies  in  the  chemical  industry,  with  a  capital  of 
332,870,000  marks;  39  companies  in  the  electrical  industry 
with  a  capital  of  195,610,000  marks. 

From  1897  to  the  year  1900,  when  the  crisis  broke  out, 
there  was  again  a  flood  of  flotations.  In  these  four  years 
no  fewer  than  1,208  joint-stock  companies  were  floated  83 
with  a  capital  of  1,730,000,000  marks,  among  them  53 
banks  with  a  total  capital  of  124,776,000  marks. 

In  1900  the  total  number  of  all  German  joint-stock 
companies  amounted  to  about  5,400.  It  was  ascertained 
that  in  the  case  of  about  4,600  companies  there  was  a 
paid-up  capital  of  6,800,000,000  marks,  and  together  with 
loans  and  reserves,  about  7,800,000,000  marks.84 

We  have  already  proved  in  detail  by  the  list  of  new 
companies  founded  between  1897  and  1900  what  a  super- 
abundance of  flotations  preceded  the  crisis  of  1900,  just 
as  was  the  case  before  the  crisis  of  1873.  Of  the  4,000 
joint-stock  companies  the  year  of  whose  flotation  we  are 
able  to  ascertain,  more  than  i  ,600  are  found  to  have  been 
founded  in.  the  years  1890-1900. 

Nearly  nine-tenths  of  all  joint-stock  companies  belong 
to  industry;  the  rest  to  the  banking  business,  with  the 
exception  of  150  insurance  companies,  which,  however, 
claim  nearly  a  third  of  the  share  and  debenture  capital. 

The  table 85  given  below  shows  for  each  year  the 
number  and  combined  capital  of  the  joint-stock  companies 
floated  since  1871.  Their  number  amounted  at  the  end 
of  1908  to  6,249  with  a  joint-stock  capital  of  9,439,530,000 
marks,  which,  compared  with  1900,  represents  an  increase 
in  joint-stock  capital  alone  of  nearly  2^/2  billion  marks. 


118 


The     German     Great    Banks 


Table  of  joint-stock  company  flotations,  1871-1908. 


Year. 

Companies 
founded. 

Joint-stock  capital. 

Total. 

Average 
for  each 
company. 

1871 

207 
479 
242 
90 
55 
42 
44 
42 
45 
97 
in 
94 
192 
153 
70 
H3 
168 
184 
360 
236 
160 
127 
95 
92 
161 
182 
254 
329 
364 
261 
158 
8? 
84 
104 
192 

212 
212 
151 

Marks. 
758,  760,  ooo 
1,477,  73°,  ooo 
544,  180,  ooo 
105  ,  920,  ooo 
45,  560,000 
18,  180,  ooo 
43,  520,  ooo 
13,  250,  ooo 
57,  140,  ooo 
91,  590,  ooo 
199,  240,  ooo 
56,  100,  ooo 
176,  030,  ooo 
in.  240,  ooo 
53,470,000 
103,  340,  ooo 
128,  410,  ooo 
193,  680,  ooo 
402,  540,  ooo 
270,  990,  ooo 
90,  240,  ooo 
79,  820,  ooo 
77,  260,  ooo 
88,  260,000 
250,  680,  ooo 
268,  580,  ooo 
380,  470,  ooo 
463,  620,  ooo 
544,390,000 

340,  460,  ooo 
158,  250,  ooo 
118,  430,  ooo 
300,  040,  ooo 
140,  650,  ooo 
386,  ooo,  ooo 
474,  510,  ooo 
253,  790,  ooo 
162,  500,  ooo 

Marks, 
3,650,000 
3,  850,  ooo 
2,  250,  ooo 
i  ,  180,  ooo 
830,  ooo 
430,  ooo 
990,  ooo 
320,  ooo 
i,  270,  ooo 
940,  ooo 
i,  800,  ooo 
600,  ooo 
920,  ooo 
720,  ooo 
760,  ooo 
920,  ooo 
760,  ooo 

I,  020,  OOO 
I  ,  I2O,  OOO 

i,  160,  ooo 
560,  ooo 
630,  ooo 
810,  ooo 
960,  ooo 
i,  560,  ooo 
i,  480,  ooo 
i  ,  500,  ooo 
i,  400,  ooo 
i,  490,  ooo 
i,  300,  ooo 

I,  020,  OOO 

i,  360,  ooo 
a  3,  570,  ooo 

I,  350,  000 
&  2,  020,  000 
I,  220,  000 

i,  260,  ooo 
i,  080,  ooo 

1872     .                    

1873 

1874                          .  .  . 

1875  
1876 

1877                           .  . 

j878  .                 .     

1879  
1880                            .  . 

j88i                         

1882  
1883  
1884 

X88s  .             

1886  

1887 

1888                           .  .  . 

1889         

1890  
1891                            .  . 

1892                             .        

1893  

1894 

1895                                 .  . 

1896   .  .    .  .     

1807 

1898  

1899               .         .... 

1  903  

1906  
1907  *6  

1908  87 

Total 

6,  249 

9.439,530,000 

«  Transformation  into  a  stock  company  of  the  Krupp  firm, 
b  Hohenlohe-Works  Company  (Limited)  40,000,000  marks. 


119 


National    Monetary     Commissio 


n 


The  average  dividend  income88  for  the  years  1870-1900 
of  shareholders  in  companies  whose  shares  were  quoted 
on  the  Berlin  exchange  may  be  seen  from  the  following 
table: 


Gross 
income. 

Net  89 
income. 

Coal  industry 

Pei-  cent. 
7   65 

Per  cent. 

Iron  industry  
Stone  and  earthen  industry  (building  material,  glass,  china)  .  . 
Metal  industry  9°  
Machine  industry 

5-82 
7.62 
8.86 

°5-34 
5-39 
7-75 
4    18 

Chemical  industry.  .                                     

9  81 

9  33 

Electrical  industry  (1883—1900)  

8.38 

8.38 

Spinning  and  weaving  industry 

c     64 

Brewing  industry  ...                         .... 

6   44 

Banking  
Life  insurance 

6.74 

06.  70 

a  1880-1900. 

The  above  explains  why  during  the  periods  under  consid- 
eration (especially  during  the  years  of  great  industrial 
development,  1886  to  1889  and  1895  to  1899)  there  has 
always  been  such  a  great  demand  for  shares  in  industrial 
companies.  This  of  course  increased  the  over-production 
of  enterprises,  especially  as  large  amounts  of  inert  capital 
continued  to  be  stirred  since  1879  by  the  nationalization  of 
the  railways  and  the  great  conversions  of  state  loans. 

As  far  as  that  branch  of  industry  is  concerned  which 
played  such  an  important  part  in  the  whole  development 
of  the  first  period,  viz,  the  mining  and  smelting  industry, 
the  following  details  are  noteworthy: 

The  German  output  of  pig-iron  in  1870  amounted  to 
only  23  per  cent  of  the  English  output,  the  English  iron 
industry  having  occupied  the  first  place  in  the  world  up  to 
1890,  since  when  the  American  iron  industry  took  the 


130 


The     German     Great    Banks 

lead.  In  1880  the  German  output  rose  to  an  amount 
equivalent  to  35  per  cent  of  the  English  output,  in  1890 
to  59  per  cent,  and  in  1900  to  93  per  cent;  the  English 
production  in  the  same  year  (1900)  only  equalled  63  per 
cent  of  the  American  output.91  After  the  expiration  of 
the  fifties  the  German  output  of  pig-iron  exceeded  the 
Belgian,  and  in  1880  the  French  output.  (See  p.  32.) 

From  the  beginning  of  the  period  under  consideration 
to  the  end  of  1907  the  production  of  pig-iron  in  the  Ger- 
man Empire  (including  Luxemburg)  rose  from  1,346,000 
tons  (1870)  to  12,875,000  tons  (1907).  In  1907  the  total 
output  of  France  amounted  to  3,589,000  tons,  that  of 
Great  Britain  and  Ireland  to  10,083,000  tons,  whereas 
that  of  the  United  States  amounted  to  no  less  than 
26,194,000  tons.92 

The  importance  of  the  last  item  can  be  gauged  by  the 
fact  that  in  1875  Germany  and  the  United  States  pro- 
duced about  the  same  amount  of  pig-iron  (in  round  num- 
bers, each  2,000,000  tons),  whereas  at  the  end  of  1907  the 
production  of  pig-iron  in  the  United  States  was  more 
than  double  that  of  Germany  (including  Luxemburg) ; 
and,  further,  that  between  July  1903  and  July  1907  the 
pig-iron  output  of  the  United  States  increased  by  no  less 
than  140,000  tons  per  week,  or  7,000,000  tons  annually.93 

Despite  the  very  considerable  growth  in  Germany's 
output  of  pig-iron  during  the  period  under  consideration, 
she  was  not  able  in  the  long  run  to  meet  her  home  con- 
sumption. Imports,  especially  from  England,  had  to 
be  relied  on  to  an  increasing  extent,  and  in  1907  they 
totaled  443,624  tons. 


National    Monetary     Commissio 


n 


The  pig-iron  consumption  in  the  German  iron  industry 
increased  considerably  during  the  last  few  years  of  the 
period  in  question  (considering  also  the  imports  and 
exports  of  pig-iron  and  the  pig-iron  contents  of  machinery 
andiron  manufactures  imported  and  exported),  namely, 
from  over  6,500,000  tons  (or  111.50  kilograms  per  head 
of  the  population  in  1904)  to  9,250,000  tons,  or  147.60 
kilograms  per  head  of  the  population.94 

As  far  as  the  proportion  of  exports  and  imports  is 
concerned,  the  same  remarks  apply  as  those  made  above 
(pp.  112  and  113)  regarding  the  development  of  industry 
in  general.  In  consequence  of  the  great  increase  in  home 
consumption,  the  iron  exports  despite  the  greatly  in- 
creased output,  could  not  grow  permanently,  falling  from 
the  high  level  of  480,575  tons  attained  in  1906  to  275,170 
tons  in  1907. 

The  output  of  coal  95  increased  in  Germany  during  the 
second  period  from  26,398,000  tons  in  1870  to  143,185,000 
tons  in  1907  (valued  at  1,394,271,000  marks);  the  output 
in  France  amounted  in  1907  to  36,168,000  tons;  in  Great 
Britain  and  Ireland  (including  lignite)  to  272,114,000 
tons,  while  that  of  the  United  States  amounted  to  not  less 
than  425,156,000  tons. 

In  1907  the  output  of  German  coal  amounted  thus  to 
one-half  the  English  output  and  to  about  one-third  the 
output  of  the  United  States. 

The  total  value  of  all  German  mining  products 
grew  from  314,000,000  marks  in  1871  to  about  one  and 
three-quarters  billion  marks  (1,844,920,000  marks)  in 
1907.  96 


122 


The     German     Great    Banks 

The  total  production  of  the  German  electro-technical 
industry,  the  enormous  growth  of  which,  beginning  with 
the  middle  of  the  nineties,  exercised  such  a  strong  influence 
on  the  other  industries,  causing  in  the  main  the  general 
over-production  and  the  crisis  of  1900,  amounted  as  early 
as  1898  to  228,700,000  marks.  Of  this  sum  211,100,000 
marks,  or  92.3  per  cent,  was  represented  by  the  value 
of  articles  belonging  to  the  strong-current  branch  (which 
was  hardly  developed  twenty  years  before),  and  only 
17,600,000  marks  by  the  value  of  articles  belonging  to 
the  weak-current  branch. 

In  1883  Emil  Rathenau,  being  convinced  at  the  Paris 
Exposition  of  1881  of  the  far-reaching  importance  of  the 
new  invention,  formed  together  with  Siemens  &  Halske 
the  first  joint-stock  company  in  the  electric  industry, 
under  the  name  of  the  Deutsche  Edisongesellschaft  fur 
angewandte  Elektrizitat.  This  company  became  inde- 
pendent of  Messrs.  Siemens  &  Halske  in  1884,  and  de- 
veloped in  1887  into  the  existing  concern  of  the  All- 
gemeine  Elektrizitdts-Gesellschaft.  This  firm  was  suc- 
cessful in  improving  the  three-phased  current  to  such  a 
degree  that  in  1891  300  horsepower  was  transmitted,  with 
very  little  loss  of  power,  over  a  line  of  175  kilometres  to 
the  exhibition  at  Frankfort-on-the-Main,  a  feat  that  made 
a  great  and  permanent  impression. 

In  1896,  as  has  been  pointed  out  (p.  118),  as  many  as 
39  electrical  joint-stock  companies  existed,  with  a  total 
capital  of  195,610,000  marks,  whereas  in  1900  there 
were  quoted  on  the  German  exchanges  the  shares  of  34 
joint-stock  companies  in  the  electrical  industry,  with 


123 


National    Monetary     Commission 

436,000,000  marks  capital  (22  in  Berlin  alone,  with 
396,700,000  marks  capital). 

The  rate  of  dividend  income  of  the  shareholders  of 
these  34  companies  amounted,  between  1883  and  1900,  to 
8.38  per  cent. 

During  the  nineties,  up  to  the  crisis  of  1900,  feverish 
activity,  coupled  with  an  almost  chaotic  and  incalcu- 
lable number  of  enterprises  and  forms  of  financing  pre- 
vailed in  the  electrical  industry,  which  in  a  very  short 
time  had  gained,  at  home  as  well  as  abroad,  a  position  of 
the  highest  importance.  Eberstadt97  quite  truly  remarks 
that  at  that  time  the  great  electrical  companies  "were 
simultaneously  machine-construction  factories,  suppliers 
of  energy,  and  financing  institutions,"  and  there  was 
scarcely  a  form  of  management  or  financing  which  was  not 
utilised  in  the  nineties  by  the  electrical  industry.  There 
were  syndicates,  subsidiary  companies  (Tochtergesell- 
schafteri),  and  trust  companies,98  the  latter  especially 
intended  to  relieve  the  banks  of  part  of  their  enormous 
financial  and  other  tasks  connected  with  electrical  under- 
takings," operating  companies  proper,100  and  manufactur- 
ing companies,  as  well  as  financing  institutions,  increases 
and  reductions  of  capital,  silent  participations,  comman- 
dites,  issues,  and  sales  in  the  open  market,  fusions,  pooling 
of  profits  (Gewinngemeinschajteri) ,  buying  of  shares, 
separations  and  combinations,  independent  and  syndi- 
cated enterprises  abroad,  conventions,  syndicates  and 
cartels  at  home  and  abroad.  In  short,  a  medley  of  under- 
takings which  might  well  have  led  outside  observers 
during  those  years  to  imagine  that  far  more  paper  was 


The     German     Great    Banks 

produced  in  the  electric  branch  of  industry  than  power 
and  light. 

To-day,  when  a  condition  of  relative  quietness  has  set 
in  and  the  early  movement  may  be  said  in  a  sense  to  have 
terminated,  it  will  be  seen  that  the  sphere  of  activity  of 
the  electro-technical  industry,  although  only  comprising 
a  relatively  small  number  of  prominent  companies  (see 
Part  V,  sub.  II,  la),  has  extended  very  largely. 

Trade  and  industry  headed  by  the  mining  industry,  as 
well  as  a  considerable  number  of  secondary  electric  rail- 
ways, and  more  recently  agriculture,  absorb  a  constantly 
increasing  amount  of  light  and  power.  The  change  of 
standard  railways  from  steam  to  electric  railways,  which 
is  only  a  matter  of  time,  will  create  new  and  profitable 
employment  for  the  electro-technical  industry. 

In  1907  the  German  exports  of  products  of  the  elec- 
trical industry  amounted  to  about  153,000,000  marks  and 
the  imports  to  about  8,000,000  marks.101  In  1907  the 
electrical  industry  gave  employment  to  100,966  workmen, 
as  compared  with  54,417  in  1898. 

According  to  a  circular  inquiry  made  by  the  German 
home  office  in  1899,  the  total  value  of  the  products  of  the 
German  electrical  industry  amounted  to  228,700,000  marks, 
as  compared  with  45,000,000  marks  in  1891,  a  fivefold 
increase  in  eight  years. 

As  regards  the  chemical  industry,102  according  to  Hiib- 
ner  ("  Jahrb.  f.  Volksw.  u.  Statistik,"  Vol.  IJX,  p.  146), 
9  German  chemical  joint-stock  companies,  with  a  capital 
of  7,300,000  marks,  existed  during  the  period  1854  to  1859; 
in  the  seventies,  however,  their  shares  were  no  longer 
quoted  on  the  stock  exchange. 


135 


National    Monetary     Commission 

The  enormous  growth  of  the  chemical  industry  and  its 
dominant  position  in  the  world  market  date  really  from 
the  beginning  of  the  seventies.  Beginning  with  the  sum- 
mer of  1870  to  the  end  of  1874,  no  less  than  42  companies, 
with  42,000,000  marks  capital,  were  formed. 

In  1883,  according  to  the  Deutscher  Oekonomist  (1885, 
p.  75),  no  less  than  51  companies,  with  a  total  capital  of 
127,220,000  marks,  published  their  balance  sheets. 

In  1896  there  were  in  existence  108  joint-stock  com- 
panies, with  a  total  capital  of  332,890,000  marks,  their 
number  having  thus  doubled  since  1883. 

The  number  of  establishments  in  which  more  than  100 
persons  were  employed,  increased,  between  1888  and  1898, 
from  156  to  247,  or  about  60  per  cent  in  ten  years. 

In  1902  there  were  7,539  establishments  in  this  indus- 
try employing  160,841  workmen  with  a  total  wage  list  of 
about  164,000,000  marks,  as  against  5,758  establishments 
with  110,348  workmen  and  a  total  wage  list  of  98,621,506 
marks  in  1894,  and  4,464  establishments  with  85,143  work- 
men and  a  total  wage  list  of  67,300,000  marks  in  1888. 
From  1882  to  1895,  or  in  thirteen  years,  the  number  of 
workmen  employed  in  the  chemical  industry  increased  61 
per  cent.  At  the  end  of  1898  a  total  of  216,580  workmen 
and  other  employees  in  the  German  chemical  industry  were 
contributing  to  the  obligatory  insurance  funds.  The  total 
wages  and  salaries  of  all  workmen  and  employees,  accord- 
ing to  the  Bericht  uber  die  Verwaltung  der  Berufsgenossen- 
schaften  der  chemischen  Industrie  for  1908,  page  3,  amounted 
to  248,731,687  marks.  The  number  of  insured  establish- 
ments was  8,699. 


126 


The     German     Great    Banks 

According  to  the  census  of  June  14,  1895,  there  were 
then  in  the  chemical  industry: 


Number. 

Employees. 

Small  establishments  (i  to  5 
Middle-sized  establishments 
Large  establishments  (51  pe 

Total 

persons)  

8.228 
i,  781 
376 

l8.  122 
25.993 

7i,  116 

(6  to  <;o  persons) 

rsons  or  more)         

10,385 

108  115,  231 

The  results  of  the  latest  census  have  not  yet  been  pub- 
lished. I/arge  establishments,  while  forming  only  a  very 
small  part  of  the  total  number,  gave  employment  to 
almost  two-thirds  of  all  the  workmen  employed  in  the 
chemical  industry. 

In  1907,  8,8 1 6  factories  employing  207,704  hands  figured 
in  the  lists  of  the  state  insurance  authorities,  i.  e.,  belonged 
to  the  trade  association  of  the  chemical  industry.104 

The  total  amount  of  wages  and  salaries  paid  to  workmen 
and  officials  in  the  chemical  industry  amounted  in  1907  to 
230,223,733  marks. 

The  imports  into  Germany  of  raw  materials  for  use  in 
the  chemical  industry  and  partly  and  wholly  manufac- 
tured chemical  products  amounted  in  1907  to  43,586,417 
metric  quintals  of  100  kilograms  each,  valued  at 
552,414,000  marks,  and  the  exports  to  31,539,353  metric 
quintals,  valued  at  640,418,000  marks.105 

In  1907  the  import  trade  decreased  somewhat  while  the 
exports  fell  off  considerably ;  the  only  large  increase  being 
shown  in  the  exports  of  artificial  indigo.106 

A  change  in  the  English  patent  law  directed  against 
the  predominance  of  the  German  chemical  industry,  and 
introduced  on  the  ist  January,  1908,  provides  that  every 


127 


National    Monetary     Commission 

holder  of  a  patent  must  manufacture  his  patented 
invention  in  England  after  four  years'  time  from  the  date 
when  the  patent  was  taken  out  in  that  country.  As  this 
law  was  given  retroactive  force,  and  became  applicable 
twelve  months  after  it  had  been  passed,  many  German 
chemical  factories  had  to  erect  branch  factories  in  England. 

This  naturally  increases  total  expenses,  but  on  the  other 
hand  allows  the  goods  manufactured  in  English  branches 
of  German  chemical  factories  to  enjoy  preferential  duties 
granted  by  some  English  colonies  to  the  mother  country.107 

It  may,  however,  become  necessary  to  make  a  corre- 
sponding change  in  the  German  patent  law,  so  far  as  Great 
Britain  is  concerned.  The  ultimate  result  of  the  latest 
unpleasant  move  on  the  part  of  our  English  competitors 
may  thus  cause  more  harm  than  good  to  British  industry, 
as  was  the  case  with  the  act  which  provided  for  the  com- 
pulsory marking  "  Made  in  Germany  "  of  imported  articles 
of  German  manufacture. 

Further  details  regarding  the  concentration  movement 
in  the  chemical  industry  are  given  below  (Part  V,  sub. 
II,  ib). 

The  census  of  June  24,  1895,  gives  the  following  data 
regarding  the  number  of  establishments  and  average  num- 
ber of  persons  employed  in  the  textile  industry : 


Number. 

Employees. 

Sfi&ll  establishments  (i  to  5  persons) 

*93  358 

258,  181 

Middle-sized  establishments  (6  to  50  persons)          _ 

8,674 

147,  477 

I^arge  establishments  (5  1  persons  and  over) 

3,  260 

587   599 

Total  

205   292 

993»  2S7 

The  very  important  position  occupied  by  the  textile 
branch  in  German  industry  is  very  evident  from  these 


128 


The     German     Great    Banks 


figures,  as  according  to  the  census  of  1895  the  total  number 
of  German  establishments  of  all  descriptions  amounted  to 
3,144,977,  employing  on  an  average  10,299,269  persons.108 

Of  the  450,000  to  490,000  home  workers,  counted  in 
1895,  almost  one-half  belonged  to  the  textile  branch  of 
industry,  although  the  number  of  textile  home  workers 
had  decreased  by  90,000  persons  between  the  years  1882 
and  1895,  and  in  various  branches  of  the  textile  branch 
by  one-fifth  to  three-fourths  of  the  original  number. 
Since,  however,  despite  this  great  decrease  of  hand-loom 
industry  in  the  textile  branch  (due  principally  to  the 
growth  of  large-scale  machine  industry) ,  there  was  in  1895 
a  falling  off  of  only  18,000  persons  employed  in  home 
work  in  German  industry  as  a  whole,  as  compared  with 
the  number  in  1882,  it  is  evident  that  home  work  has  not 
declined  in  many  German  industries,  but  rather  increased. 
Ludwig  Pohle 109  is  quite  right  in  calling  special  attention 
to  this  very  interesting  fact  and  to  the  above  figures. 

The  fact  should  also  be  emphasized  that  the  number  of 
home  workers  increased  in  the  large  towns  from  3 1 ,000  to 
71,000  between  1882  and  1895,  having  thus  more  than 
doubled  during  these  thirteen  years.110 

In  the  3,144,977  establishments  mentioned  above  as 
existing  in  the  German  Empire  in  1895,  the  10,269,269 
employees  were  distributed  as  follows :  m 


Number. 

Average 
number 
employees. 

Small  establishments  (  i  to  5  persons)  .      

2,  934,  723 

4   770  669 

Middle-sized  establishments  (6  to  50  persons) 

191,  301 

Large  establishments  (over  5  o  persons)          _    . 

18,  953 

Total  

3,  144,  977 

90311"— II- 


129 


National    Monetary     Commission 

The  number  of  large  establishments  is  relatively  small, 
although  between  the  years  1882,  when  they  totaled 
9,974,  and  1895,  their  number  had  increased  no  less  than 
90  per  cent.  In  view  of  this,  the  fact  is  particularly 
striking  that  almost  one-third  of  all  persons  occupied  in 
industry  were  employed  in  these  large  industrial  estab- 
lishments. 

If  we  turn  our  attention  to  the  enormous  development 
of  the  means  of  communication  during  this  period,  taking 
the  railways  first,  it  will  be  seen  (p.  35)  that  the  network 
of  German  railways  comprised  27,981  kilometers  as  long 
ago  as  1875.  As  far  as  main  lines  are  concerned,  the  Ger- 
man railway  system  was  completed  in  the  main  during  the 
eighties.  In  the  second  period  (the  one  under  considera- 
tion) the  private  German  railways  were  acquired  by  the 
State,  and  the  network  of  main  and  branch  lines  (standard 
gauge)  in  Germany  112  at  the  end  of  1907  totaled  56,196 
kilometers,  including  51,871  kilometers  of  railways  owned 
by  the  Government  or  managed  on  Government  account, 
and  4,320  kilometers  of  private  railways.113  Of  53,822 
kilometers  in  1904,  33,734  kilometers  belonged  to  the 
Prussian-Hessian  Railway  Union.114 

The  capital  invested  in  these  standard-gauge  main  and 
branch  lines  amounted  at  the  end  of  1902,  in  round  fig- 
ures, to  13^  billion  marks,  and  at  the  end  of  1907  to  about 
15^2  billions,  or  at  the  end  of  1902  to  258,000  marks  per 
kilometer,  and  at  the  end  of  1907  to  277,100  marks  per 
kilometer  of  railway  line. 

At  the  end  of  1906,  1,284,676,000  persons  and 
508,270,000  tons  of  goods 115  were  conveyed  by  these 
railways.  An  average  number  of  20  railway  journeys  is 


130 


The     German     Great    Banks 


thus  shown  for  every  inhabitant  of  Germany  during  the 
year. 

The  total  traffic  receipts  of  the  standard  gauge  railways 
amounted  in  1907  to  2,745,000,000  marks,  and  the  total 
expenses  of  operation  to  1,894,000,000  marks.  The  sur- 
plus of  traffic  receipts  over  expenses  of  operation  was  thus 
851,000,000  marks;  the  rate  of  profit  on  the  capital  in- 
vested amounted  to  5.60  per  cent,  and  the  percentage  of 
expenses  of  operation  to  traffic  receipts  (coefficient  of 
operation)  amounted  in  1907  to  about  69  per  cent. 

The  home  requirements  of  the  German  railways  for 
rolling  stock  alone  amounted  in  1907  to  288,000,000 
marks.  The  requirements  for  operating  material  and 
superstructure  of  the  German  railways  during  the  last 
fifty  years,  which  were  principally  met  by  German  mining, 
metallurgical,  and  machine  construction  industries,  have 
been  estimated  at  about  5  billion  marks.116 

In  addition  to  the  standard-gauge  main  and  branch 
lines,  on  April  i,  1907,  there  were  in  operation  3,719.2 
kilometers  of  public  street  railways  (Kleinbahneri)  and 
8,99 :  -9  kilometers  of  secondary  railways  (nebenbahnahnliche 
Kleinbahnen)  ,117  To  these  must  be  added  the  narrow- 
gauge  state  and  private  railways  (end  of  1907,  2,100  kilo- 
meters),118 besides  sidings,  mining,  agricultural,  and  forest 
railways  not  used  by  the  general  public. 

As  far  as  the  postal  service  is  concerned,  it  has  been 
pointed  out  (p.  37)  that  in  Prussia  during  1851  only  about 
three  letters  were  received  per  head  of  population;  in  1906, 
over  5^3  billion  letters  and  post  cards  (5,393,300,000) 
were  dispatched  in  the  German  Empire  (including  Bavaria 
and  Wurttemberg) ,  averaging  86  letters  per  head  of 


National    Monetary     Commissio 


n 


population.  Printed  matter  (newspapers) ,  samples  as  well 
as  parcels  and  articles  of  value  are  not  included  in  the 
above  total.119  In  1904  the  number  of  mail  matter  dis- 
patched averaged  115  per  head  of  population,  and  in 
the  same  year  there  was  one  post-office  to  every  14 
square  kilometers  of  area  and  every  1,458  inhabitants. 

At  the  end  of  1907  there  were  40,083  post-offices  in  Ger- 
many; at  the  end  of  1906  there  was  one  post-office  to 
every  1,530  inhabitants  and  13.60  square  kilometers. 

In  1882  one  telegraph  office  did  duty  for  every  133.7 
square  kilometers;  in  1904  there  was  one  for  every  18 
square  kilometers,  with  a  total  of  35,100,000  telegrams,  or 
an  average  of  0.65  telegram  per  head  of  population.  At 
the  end  of  1907  the  number  of  telegrams  dispatched 
amounted  to  nearly  44,000,000,  and  the  number  received 
to  46,000,000.  At  the  end  of  1907  there  was  an  average 
of  0.71  telegram  sent  per  head  of  the  population,  and  a 
like  number  received.  On  the  same  date  there  were 
37,309  telegraph  offices  in  Germany.120 

As  to  telephones,121  which  were  adopted  during  the 
period  under  discussion,  there  were  in  Germany,  at  the 
end  of  1907,  30,901  towns  and  villages,  etc.,  provided 
with  long-distance  telephone  offices  (1899,  13,175).  At 
the  end  of  1907  87,521  (1899,  1,964)  places  could  com- 
municate with  each  other  by  telephone.  Over  927,000,000 
telephone  conversations  took  place  in  1903,  and 
1,466,000,000  in  1907.  In  1907  there  were  18.2  telephonic 
messages  per  head  of  the  population.  In  Berlin  alone 
there  were  in  1898  over  40,000  telephone  call  places,  with 
68,000  kilometers  of  line,  over  which  38,000  conversations 
were  carried  on  daily.  In  1904  there  was  one  telephone 


132 


The     German     Great    Banks 

office  to  every  23.5  square  kilometers  and  2,448  inhab- 
itants. 

The  total  value  of  all  German  merchant  vessels 
amounted  at  the  end  of  1897  to  about  300,000,000  marks, 
at  the  end  of  1899  to  about  5oo,ooo,ooo,122  and  at  the  end 
of  1905  to  about  810,000,000  marks  (as  compared  with 
290,000,000  marks  in  1895  and  426,000,000  marks  in  1898). 
On  the  ist  of  January,  1908,  Germany  possessed  4,571 
seagoing  vessels  (merchantmen) ,  with  a  carrying  capacity 

of  2,790,435  net  registered  tons,  and  a  total  crew  of  71,853 

• 

men. 

These  4,571  merchant  vessels  included  2,345  sailing 
vessels  of  433,749  net  registered  tons,  304  tugs  of  99,903 
tons,  and  1,922  steamships  of  2,256,783  net  tons  regis- 
ter.123 

The  net  registered  tonnage  of  the  German  merchant 
marine  (steam  vessels)  has  increased  from  375,000  tons 
in  1884,  to  2,257,000  tons  (in  round  numbers)  in  1908. 124 

According  to  the  memorial  of  the  admiralty,  dated  De- 
cember, 1905,  entitled  "Die  Entwickelung  der  deutschen 
Seeinteressen  im  letzten  Jahrzehnt"  (Introduction,  p.  VI), 
the  shipping  at  German  ports  increased  between  1893  and 
1903  by  over  52  per  cent,  or  from  27,500,000  to  almost 
42,000,000  net  registered  tons.  In  1907  it  amounted  to 
56, 1 29,000  net  registered  tons.  In  the  same  memorial  it  is 
stated  that  Germany  has  been  progressing  about  four  times 
more  rapidly  in  international  sea  traffic  than  in  popula- 
tion, while  the  increase  of  trans-marine  traffic  in  German 
ports  has  been  almost  six  times  as  great. 

As  far  as  sea-going  steamships  are  concerned,  the  Ger- 
man merchant  marine  occupied  in  1874  fourth  place, 


133 


National    Monetary     Commission 

whereas  the  British,  American,  and  French  mercantile 
fleets  took  the  first  three  places  in  the  order  named. 

In  1884,  however,  Germany  caught  up  with  the  United 
States  (the  ocean  fleet  of  which  had  decreased  considerably 
by  that  time),  and  in  1889  France  was  outdistanced.  In 
1908  Germany,  with  a  net  tonnage  of  2,328,000  tons, 
occupied  the  second  position  on  the  list,  although  possessing 
only  1 1 .2  per  cent  of  the  steamships  of  the  world's  mercan- 
tile marine.  On  the  other  hand,  England,  whose  progress 
naturally  was  relatively  smaller  during  that  period,  pos- 
sessed in  1908  no  less  than  10,350,000  net  tons,  or  50.2 
per  cent  of  the  world's  mercantile  fleet  of  steamships, 
which  latter  amounted  to  20,633,000  net  registered  tons.125 

As  regards  her  sailing  fleet,  Germany  between  1880  and 
1901  occupied  fourth  place  among  the  nations,  owning  in 
1880  957,000  tons  out  of  the  world's  sailing  tonnage  of 
6,994,000  tons.  In  1908  it  occupied  only  sixth  place, 
with  459,000  net  tons  register.  The  following  are  the 
figures  for  the  other  countries:126 

Tons. 

England i,  591,  ooo 

United  States i,  419,  ooo 

Norway 667,  ooo 

Russia 569,  ooo 

France 510,  ooo 

The  officers  and  crews  of  the  German  seagoing  ships 
(sailing  vessels,  tugs,  and  steamships)  numbered  on  Jan- 
uary i,  1909,  72,450  persons,  distributed  as  follows:  Sea- 
men, 34,308;  engineers,  23,201;  and  various,  14,941. m 

It  is  pleasing  to  note  that  subsidies  were  granted  by 
Germany  solely  for  the  maintenance  of  regular  lines  of 
mail  steamers  of  the  North-German  Lloyd  and  the  Ger- 


The     German     Great    Banks 

man  East  Africa  Line  (the  Hamburg-American  Line  does 
not  receive  any  subsidy)  to  eastern  Asia,  Australia, 
Africa,  and  New  Guinea  beginning  with  the  year  1894. 
The  amount  paid  in  1909  did  not  exceed  the  very  mod- 
erate total  of  7,440,000  marks,  equal  to  1.85  marks  per 
registered  ton.128  These  amounts  include  also  the  pay- 
ments for  carrying  the  mails. 

As  against  this  small  amount  Great  Britain  has  been 
paying  since  1902  to  the  Cunard  Line  alone  a  yearly  sub- 
sidy of  £150,000,  besides  granting  to  that  company  a 
loan  of  £2,600,000,  bearing  only  2^  per  cent  interest. 
The  total  subsidies  granted  by  that  country  were  not 
less  than  34,000,000  marks  (1.95  marks  per  registered 
ton).  France  spends  53,000,000  marks  in  subsidies 
(28.00  marks  per  registered  ton),  Austria-Hungary, 
26,000,000  marks  (26.70  marks  per  registered  ton),  and 
Japan,  28,500,000  marks  (24.70  marks  per  registered 
ton).129 

The  most  prominent  of  the  German  shipping  compa- 
nies are  the  following: 

i.  The  Hamburg- American  Packet  Joint  Stock  Com- 
pany, at  Hamburg,  founded  May  27,  1847,  with  a  capital 
of  300,000  marks  (Hamburg  currency),  which  has  under- 
gone not  less  than  sixteen  increases  from  1 853  to  the  present 
day.130  This  company  began  operations  in  1848  with  3 
sailing  vessels,  steamers  between  Hamburg  and  New  York 
being  introduced  only  in  1856. 

At  the  end  of  1908  the  company's  share  capital  amounted 
to  125,000,000  marks,  and  its  surplus  amounted,  on  Jan- 
uary i,  1909,  to  16,800,000  marks. 


135 


National    Monetary     Commission 

The  amount  of  bonds  issued  was  originally  55^  million 
marks.  At  the  end  of  1908  the  outstanding  bonds 
amounted  to  76.4  million  marks. 

The  number  of  the  company's  ocean  steamers  amounted 
at  the  end  of  1908  to  162,  with  a  book  value  of  185,953,076 
marks. 

2.  The  Norddeutscher  Lloyd,  at  Bremen,  was  founded 
in  1857,  or  ten  years  after  the  Hamburg  Company,  banks 
and  banking  firms  participating  to  a  considerable  extent. 
Its  original  share  capital  amounted  to  9,513,772  marks 
(28,643  shares,  at  100  former  Bremen  gold  thalers).  In 
1859  the  company  started  a  regular  fortnightly  service 
with  four  steamers  between  Bremen  and  New  York. 

The  company's  share  capital  totaled  125,000,000  marks 
at  the  end  of  1908,  while  its  surplus  funds  have  been 
used  up  by  losses. 

Its  bonded  indebtedness  originally  amounted  to  70 
million  marks.  At  the  end  of  1908  the  bonds  outstand- 
ing amounted  to  76,034,700  marks. 

The  company's  ocean-going  fleet  numbered  at  the  end 
of  1908  127  vessels  (besides  2  schoolships) ,  with  a  book 
value  of  189,114,000  marks. 

Between  1902  and  1903  these  two  companies  131  made 
essentially  identical  agreements  132  with  the  International 
Mercantile  Marine  Company,  which  was  founded  Jan- 
uary i,  1903,  by  American  bankers  and  shipowners,  with 
a  capital  of  $120,000,000  (of  which  $60,000,000  were 
common  and  $60,000,000  preference  shares),  and  which 
comprised  nine  American  and  English  steamship  lines. 
This  company,  which  is  named  the  "  Morgan  trust,"  after 
the  originator  of  the  association,  is  authorised  to  issue 


136 


The     German     Great    Banks 

bonds  to  the  extent  of  $75,000,000,  of  which  $50,000,000 
were  issued  at  once.  The  contracts  with  the  two  German 
companies,  which  are  almost  identical  in  tenor,  have 
been  concluded  for  a  term  of  twenty  years,  and  contain 
a  stipulation  that  either  party  has  the  right  after  the 
expiration  of  ten  years  to  demand  their  revision;  should 
a  revision  not  be  agreed  to,  a  year's  notice  may  be  given 
for  the  termination  of  the  agreement. 

These  international  agreements  contain  the  following 
points : 

i.  A  demarcation  of  fields  of  operation:  the  right  of 
traffic  to  and  from  all  German  ports  is  reserved  to  the 
German  companies;  the  trust's  ships  may  enter  German 
ports  only  by  their  consent,  whereas  German  ships, 
coming  from  New  York,  may  enter  English  ports  for  the 
purpose  of  embarking  passengers  (each  company  75 
times  yearly  in  any  direction).  The  German  companies' 
ships  bound  for  South  America,  Mexico,  and  the  West 
Indies,  as  well  as  those  bound  for  such  countries  with 
which  the  trust  maintains  no  service,  may  also  touch  at 
English  ports. 

On  the  other  hand,  the  German  companies  abandon 
in  the  main  all  claims  to  the  Anglo-American  freight 
business. 

Belgian  ports  (at  which  German  ships  had  not  called 
before)  are  not  to  be  touched  by  the  German  companies* 
ships  on  their  way  to  North  America;  the  status  quo 
forms  the  basis  of  the  arrangement  for  calls  by  German 
or  trust  steamships  at  French  ports.  The  German  com- 
panies, however,  are  at  liberty  to  increase  their  sailings 
from  French  ports  at  their  own  discretion.  In  case  such 


137 


National     Monetary     Commission 

an  increase  takes  place,  the  trust  is  entitled  to  an  equal 
increase. 

Should  any  of  the  contracting  parties  desire  to  found 
a  new  line  (permanent  reservation  is  made  expressly  in 
favour  of  the  newly  instituted  lines  of  the  Hamburg- 
American  Company  between  New  York  and  the  West 
Indies  and  between  New  York  and  eastern  Asia) ,  notice 
of  the  intention  must  be  submitted  to  the  common  com- 
mittee of  supervision.  This  committee  does  not  possess 
the  right  of  veto,  but  the  other  contracting  party  has 
the  right,  in  such  a  case,  of  participating  to  the  extent  of 
one-third  in  the  proposed  line  (coasting  lines  excluded) . 

An  agreement  has  been  arrived  at  whereby  the  return 
tickets  of  cabin  passengers  on  North  Atlantic  lines  of  the 
various  companies  are  valid  for  all  lines  belonging  to  the 
combination.  Negotiations  were  likewise  pending  for  a 
common  time-table  for  first-class  steamships  with  alter- 
nating departures  during  the  quiet  season.  These  nego- 
tiations however,  it  seems,  were  not  successful. 

The  agreements  contain — 

2.  A  reciprocal  participation  in  profits  whereby  the 
German  companies  allow  the  trust  annually  a  quarter 
of  the  amount  of  the  dividends  paid  in  excess  of  6  per 
cent,  whereas  the  trust  pays  to  the  German  companies  a 
quarter  of  the  amount  which  they  may  lack  in  order  to 
pay  a  dividend  of  6  per  cent. 

3.  An  arrangement  for  mutual  accommodation  in  cer- 
tain cases;  i.  e.,  each  party  before  applying  to  outside  com- 
panies must  charter  ships  from  the  other  party  in  the  event 
its  own  tonnage  is  found  insufficient ;    also  a  provision 


138 


The     German     Great    Banks 

to  the  effect  that  both  parties  under  certain  conditions 
are  to  support  each  other  against  outside  competition. 

Both  contracting  parties  bind  themselves  not  to  acquire, 
directly  or  indirectly,  shares  in  each  other's  concerns. 
The  evasion  of  this  prohibition  has  been  made  more  diffi- 
cult by  the  German  companies  in  1902  (after  the  conclusion 
of  the  agreement)  by  alterations  in  their  by-laws  to  the 
effect  that  in  certain  questions  of  national  importance 
resolutions  may  be  passed  only  by  a  majority  of  three- 
fourths  (in  the  Hamburg-American  Company  by  four- 
fifths)  ,  and  at  two  consecutive  general  meetings,  and  that 
the  members  of  the  executive  and  supervisory  boards  must 
be  Germans  domiciled  in  Germany. 

The  supervision  of  the  proper  execution  of  the  agree- 
ment is  placed  in  the  hands  of  a  committee  consisting  of 
an  Englishman  and  an  American  belonging  to  the  trust 
management  and  the  directors-general  of  the  two  German 
companies. 

The  agreements  become  null  and  void  in  case  of  war 
between  Germany  and  Great  Britain  or  the  United  States, 
or  in  case  of  war  between  Great  Britain  and  the  United 
States. 

In  1908  an  agreement  was  arrived  at  between  the  Ham- 
burg American  Steam-packet  Company  (Hapag)  and  the 
Woermann  Line  on  one  side,  and  the  North  German 
Ivloyd  and  the  Hamburg  Bremen  Africa  Line  on  the  other 
side.  (At  first  only  till  the  end  of  1912.)  The  agreement 
creates  a  limited  community  of  interest  between  the 
companies  involved  and  regulates  the  traffic  to  West 
Africa  by  excluding  any  independent  action  in  connection 
with  the  West  African  traffic  by  any  of  the  parties  to  the 
agreement. 

139 


National    Monetary     Commission 

Shipbuilding,  which  was  promoted  by  German  banks  to 
a  great  extent,133  became  prosperous  again  only  in  the 
eighties.  It  was  only  about  that  time  that  the  British 
practice  of  substituting  iron  for  wood  as  the  main  mate- 
rial in  shipbuilding,  which  began  about  1860,  was  first 
followed  by  German  shipyards.  The  ' '  Vulkan' '  at  Stettin, 
the  shipbuilding  yards  of  Fr.  Schichau  at  Blbing  and 
Danzig,  of  Blohm  &  Voss  at  Hamburg,  and  of  the  "  Weser  " 
Joint  Stock  Company  at  Bremen  stand  at  the  head  of 
German  shipbuilding.  In  this  industry  the  joint-stock 
companies  showed  in  1907  a  total  share  capital  of 
54,000,000  marks  and  a  debenture  capital  of  about 
25,000,000  marks. 

According  to  the  occupation  census  of  1895,  22,731 
persons  were  employed  in  German  shipbuilding,  a  number 
which  must  have  considerably  increased  during  the  last 
fourteen  years. 

According  to  the  data  of  the  Germanischer  Lloyd  a 
total  of  368,440  gross  registered  tons  of  shipping  (seagoing 
steamships  and  sailing  ships,  river  boats,  other  vessels, 
and  war  ships)  were  built  during  1907,  the  figures  for  1908 
being  279,137  gross  registered  tons;  a  large  part  of  Ger- 
man sea-going  merchant  vessels  (up  to  1905  about  one- 
third)  is  still  being  built  abroad. 

Germany's  share  in  the  shipbuilding  of  the  world  (mer- 
chant vessels  exceeding  100  tons)  as  compared  with  Great 
Britain's  has  been  as  follows: 


Germany. 

Great  Britain. 

1892—1897 

Per  cent. 
1   3 

Per  cent. 

1898—1905 

6?    4 

1906-1907  

13  8 

60  3 

140 


The     German     Great    Banks 

American  shipbuilding  (iron  and  steel  vessels)  in  1907-8 
increased  about  sixfold  as  compared  with  1892-1897. 

If  we  turn  from  sea  navigation,  with  its  enormous  di- 
mensions, to  inland  navigation,  which  has  developed  con- 
siderably since  the  forties  of  the  last  century,  it  will  be 
found  that  14  new  joint-stock  companies  were  founded  in 
this  field  during  the  eighties  and  six  additional  companies 
in  the  nineties.134  The  economic  value  of  the  German 
waterways  was  estimated  in  1895  at  over  1,500,000,000 
marks. 

On  December  31,  1907,  there  were  26,235  vessels,  with 
a  carrying  capacity  of  5,914,020  tons,  occupied  in  inland 
navigation,  including  22,923  without  power  of  their  own 
and  3,312  ships  with  power  of  their  own  (steamships  and 
motor  boats)  ,135  The  total  length  of  navigable  waterways 
was  13,748.6  kilometers.136 

In  1895,  22  per  cent  of  the  total  traffic  fell  to  the  share 
of  waterways  and  78  per  cent  to  that  of  the  railways.  The 
amount  of  traffic  carried  on  each  kilometer  of  waterway 
was  750,000  tons,  and  on  each  kilometer  of  railway  590,000 
tons. 

I  take  it  for  granted  that  the  large  increase  of  the 
German  navy  during  the  period  in  question,  which  in 
its  turn  resulted  in  important  orders  to  and  great  activity 
of  various  branches  of  German  industry,  is  generally 
known.137 

We  shall  now  take  up  the  subject  of  currency  (Zah- 
lungsverkehr) . 

Before  the  foundation  of  the  German  Empire  there 
existed  in  Germany  31  banks  authorised  to  issue  bank 
notes;  to-day  there  are  only  4  private  note  banks  (in 


141 


National    Monetary     Commission 

Bavaria,  Saxony,  Wiirttemberg,  and  Baden)  in  addition  to 
the  Reichsbank  inaugurated  on  January  i ,  1876,  in  accord- 
ance with  the  law  passed  on  March  14,  1875. 

The  Reichsbank,138  which  took  the  place  of  the  old 
Preussische  Bank,  is  a  bank  under  the  supervision  and 
management  of  the  Empire,  established  with  private 
means  and  constituting  a  corporate  body  (juristische 
Person)  though  not  a  joint-stock  company.  According 
to  section  12  of  the  bank  law  it  is  allotted  the  task  "of 
regulating  the  money  circulation  of  the  whole  Empire,  of 
facilitating  payments,  and  of  utilising  available  capital." 

The  original  capital,  divided  into  shares  (each  bearing 
the  name  of  the  owner) ,  amounted  at  the  time  of  founda- 
tion to  1 20,000,000  marks,  and  since  the  supplementary  law 
of  June  7,  1899,  has  reached  the  amount  of  180,000,000 
marks;  the  surplus  funds  amount  to  64,814,000  marks. 

The  management  of  the  Reichsbank  rests  in  the  hands 
of  the  Imperial  chancellor,  and,  subject  to  his  authority, 
in  those  of  the  president  and  of  the  Reichsbank  directors, 
who  are  appointed  for  life;  supervision  is  carried  on  by  a 
board  of  bank  curators  (curatorium) ,  consisting  of  the 
Imperial  chancellor  as  chairman  and  four  members. 

The  cooperation  in  the  management  by  the  share  owners 
(chiefly  in  an  advisory  capacity)  is  exercised  through  the 
general  meeting,  and  through  the  central  committee 
elected  from  its  midst,  which  consists  of  15  members  and 
15  alternates.  The  committee,  which  meets  at  least  once 
a  month,  under  the  chairmanship  of  the  president  of  the 
board  of  directors,  receives  monthly  reports  of  the  general 
business  situation  as  well  as  proposals  for  measures  that 
may  be  deemed  necessary.  (Sec.  32 .)  Its  expert  opinion  is 


142 


The     German     Great    Banks 

also  to  be  heard  on  a  number  of  questions,  such  as  the  dis- 
count rates  and  the  maximum  amount  to  which  the  funds 
of  the  bank  are  to  be  applied  to  loans  on  collateral  (see  sec. 
32  a-f) ;  it  elects  3  deputies,  whose  duty  it  is  to  exercise 
supervision  over  the  management  of  the  Reichsbank,  and 
who  are  authorized  to  inspect  the  books  of  the  bank,  and 
to  participate  in  the  meetings  of  the  board  of  directors 
(with  advisory  powers).  No  business  with  the  Empire, 
or  the  German  Federated  States  for  which  unusual  terms 
are  to  be  made,  is  to  be  transacted  unless  approved  by  a 
majority  of  the  central  committee. 

At  the  chief  branches  of  the  Reichsbank,  established  in 
large  towns  outside  Berlin  (Reichsbankhauptstelleri) ,  dis- 
trict committees  are  formed  from  among  the  shareholders, 
invested  with  the  same  functions  as  the  central  committee. 
The  local  committees  in  turn  elect  3  deputies  for  the  con- 
stant  control  of  the  business  management  of  the  local 
office.  Over  500  various  branches  are  in  existence  at  the 
present  day. 

The  Reichsbank  has  the  right  to  issue  bank  notes  with- 
out  direct  limitation  according  to  the  requirements  of  its 
business.139  Its  right  is  only  limited  indirectly  by  section 
17  of  the  bank  law,  which  enacts  that  the  bank  must 
possess  in  bullion  and  Imperial  treasury  notes  a  minimum 
of  one-third  of  the  amount  for  which  notes  are  issued, 
and  for  the  remainder — discounted  bills  fulfilling  the  re- 
quirements of  the  Bank  Act  (bankmdssige  Wechsel) ;  fur- 
thermore, that  a  tax  of  5  per  cent  must  be  paid  on  the 
notes  issued  in  excess  of  the  cash  reserve,  i.  e.,  bullion, 
treasury  notes,  and  notes  of  other  banks,  and  of  its 
so-called  tax-free  contingent.  (Sec.  9.)  The  latter 


143 


National    Monetary     Commission 

amounted,  according  to  the  Bank  Act,  to  250,000,000 
marks,  and  since  the  liquidation  of  various  private  note 
issuing  banks  to  472,829,000  marks.  The  bank  is  bound 
to  redeem  its  notes  at  all  times  "  in  German  gold  coin,"140  at 
the  main  office  in  Berlin  on  presentation,  and  at  its  branch 
offices  in  so  far  as  the  available  cash  and  money  require- 
ments permit."  (Sec.  18.) 

In  view  of  its  power  of  issuing  notes,  i.  e.,  obligations 
that  may  fall  due  at  any  moment,  the  Reichsbank  is 
allowed  to  engage  only  in  certain  classes  of  transactions. 
It  is  confined  to  transactions  in  precious  metals;  to  the 
discounting  of  bills  running  for  not  more  than  three 
months  and  for  which  3  or  at  least  2  persons  of  known 
solvency  are  liable;  the  purchase  and  sale  of  imperial  gov- 
ernment bonds,  of  the  bonds  of  Federated  States,  or  of 
domestic  municipal  corporations  payable  at  their  face 
value  at  the  latest  in  three  months;  the  granting  of 
interest-bearing  loans  on  collateral  for  a  period  not  exceed- 
ing three  months  on  movable  pledges  exactly  defined  by 
law  (sec.  13,  clause  3  a-c) ;  the  purchase  and  sale  of  Ger- 
man debentures,  exactly  denned  by  the  Bank  Act  (sec.  13, 
clause  4  and  3b)  (even  if  not  due  after  three  months) ;  the 
collection  of  commercial  bills,  the  purchase  and  sale  of 
precious  metals  or  of  securities  of  all  kinds  on  account  of 
third  parties  (security  being  given  in  advance) ;  the  re- 
ceiving of  interest — and  noninterest-bearing  moneys  on 
deposit  and  on  giro  account,  with  the  proviso  that  the 
amount  of  the  interest-bearing  deposits  must  not  exceed 
the  limits  of  the  combined  capital  and  the  surplus  funds 
of  the  bank;  finally,  the  custody  and  management  of 
articles  of  value. 


144 


The     German     Great    Banks 

The  Reichsbank  is  required  to  publish  from  time  to 
time  the  rate  at  which  it  discounts  or  advances  money  on  \ 
collateral  (sec.  15);  like  all  other  note  banks  (sec.  8),  it' 
must  publish  the  state  of  its  assets  and  liabilities  under 
date  of  the  yth,  isth,  and  23d,  and  the  last  day  of  every 
month  (at  the  latest  five  days  after  the  above-mentioned 
dates).  It  must  also  publish  within  three  months  after 
the  end  of  the  financial  year  an  exact  balance  sheet  of  its 
assets  and  liabilities,  as  well  as  a  statement  of  its  profit 
and  loss  for  the  year.  All  these  statements  must  be 
published  in  the  "  Reichsanzeiger." 

From  its  foundation  to  the  present  day  the  Reichsbank 
has  fulfilled  all  the  tasks  devolving  on  it  under  section  12 
of  the  bank  law  in  an  almost  exemplary  manner.  The 
details  are  well  known  and  can  only  be  summarized  here. 

The  Reichsbank  has  rendered  service  in  the  first  in- 
stance in  facilitating  payments  through  the  introduction 
on  April  10,  1876,  of  "giro"  transactions,  the  principle  of 


which  is  that  in  lieu  of  payment  in  cash  between  the 
' '  giro ' '  culslomers  tF^  t>e 


made  Ty^^iLiii^'UJg^  LU  Ug'  paid  jrpnr  the 


account  of  the  pay  or  and  transferring"^  to  tHat"  "bTTHe 
payee.  "  Gn"o~T1^ansacftoiis""foTm  f  EeTmost  simple  method 
of  settling  claims  and  counterclaims  at  one  and  the  same 
bank,  namely,  by  transfer  from  one  account  to  another. 
Since  1883  so-called  compulsory  clearance  ("Verrech- 
nungs-Zwang")  has  been  introduced  for  "  giro  "  customers, 
according  to  which  all  claims  of  a  "  giro  "  customer  arising 
out  of  bill  or  collateral  credit  granted  by  the  Reichsbank 
are  not  paid  in  cash,  but  placed  to  the  credit  of  his  "  giro  " 
account. 

90311°—  ii-  —  ii  145 


National     Monetary     Commission 

Since  1896  most  of  the  imperial  treasuries,  as  well  as 
the  state  treasuries  of  Prussia  and  Baden,  have  opened 
"giro"  accounts  with  the  Reichsbank. 

The  number  of  "giro"  accounts  increased  from  3,245 
in  1876  to  24,821  in  1908;  aside  from  the  governmental 
treasuries  these  accounts  stand  mostly  in  the  name  of 
large  commercial  and  industrial  concerns,141  so  that  up  to 
the  present  the  "giro"  transactions  of  the  Reichsbank 
have  partaken  of  a  somewhat  plutocratic  character. 
Therefore,  in  the  interest  of  the  more  economical  use  of 
cash  as  means  of  payment,  the  introduction  of  the  postal 
transfer  and  check  system  on  January  i,  1909,  must  be 
welcomed,  as  largely  extending  the  circle  of  firms  and  per- 
sons who  settle  their-  claims  and  counterclaims  by  means 
of  transfer.  As  the  Reichsbank  has  also  joined  this  postal 
transfer  and  check  system,  transfers  can  be  made  by  firms 
possessing  postal-check  accounts  to  Reichsbank  "giro" 
accounts  of  other  firms  by  means  of  the  Reichsbank 
postal-check  account.  In  the  same  manner  the  possessor 
of  a  postal-check  account,  who  likewise  has  a  "giro" 
account  at  the  Reichsbank,  may  have  the  amounts  stand- 
ing to  his  credit  in  his  postal-check  account  transferred 
to  his  "giro"  account  at  the  Reichsbank. 

Through  this  interlocking  of  postal  check  and  Reichs- 
bank "giro"  systems  (which  latter  might  be  considerably 
extended) ,  and  through  a  still  greater  fostering  of  the  use 
of  checks,  whose  ultimate  liquidation,  however,  should 
be  effected  by  transfer  and  clearance,  rather  than  by  cash 
payment,  the  present  antiquated  and  unsatisfactory  meth- 
ods of  payment  in  Germany  will  be  considerably  improved, 


146 


The     German     Great    Banks 

A  great  and  necessary  improvement  would  be  brought 
about  by  suitable  agreements  with  foreign  postal  savings 
banks,  central  note  banks,  and  credit  banks,  whereby  their 
transfer  systems  might  be  made  to  cooperate  with  the 
transfer  systems  of  the  German  post-office  and  Reichsbank. 
A  first  step  in  this  direction  is  the  arrangement  of  Feb- 
ruary i,  1910,  for  the  clearing  of  postal  checks  and  trans- 
fers between  the  German  postal  administration  and  the 
postal  savings  bank  administrations  in  Vienna  and  Buda- 
pest as  well  as  the  Swiss  postal-check  bureau. 

The  "  giro  "  transactions  of  the  Reichsbank  with  private 
persons,  private  firms,  and  public  treasuries  in  1907  were 
as  follows: 

Marks. 

Average 'amount  of  each  account 24,  116 

Average  volume  of  transactions  per  account 10,  876,  564 

whereas  the  total  volume  of  "giro"  transactions  during 
1907  amounted  to  260,656,851,081  marks.142 

The  number  of  postal-check  accounts  amounted  at  the 
end  of  November,  1909,  to  23,847,  with  a  total  balance 
of  70,955,349  marks  to  the  credit  of  persons  and  firms 
having  such  accounts. 

The  means  at  the  disposal  of  the  "giro"  department 
strengthen  the  operating  resources  of  the  Reichsbank  or 
its  power  to  serve  the  whole  economic  community  by  way 
of  bill  and  loan  transactions,  and  enable  it  to  make  the 
most  rational  use  of  its  bank-note  issue.  At  the  same 
time  the  currency  set  free  through  the  "giro"  method  of 
payments  can  be  utilised  for  credit  business. 

The  "giro"  business  of  the  Reichsbank,  which  is  re- 
stricted to  its  customers,  should  be  supplemented  by  the 


147 


National    Monetary     Commission 

clearance  system,  which  aims  at  discharging  claims  and 
debts  (especially  checks,  bills,  etc.)  among  a  number  of 
institutions  and  their  clientele  by  means  of  balancing 
their  accounts — i.  e.,  with  the  least  possible  use  of  cash. 

A  clearance  system  [Skontrationsverkehr]  of  this  de- 
scription, which  has  long  been  organised  on  a  much  larger 
scale  abroad  in  the  form  of  clearing  houses,  (especially 
in  England  and  the  United  States) ,  was  instituted  in  Ger- 
many as  late  as  1883,  in  which  year  the  Reichsbank 
founded  clearing  branches  [Abrechnungsstellen].  At  the 
close  of  1908,  when  there  was  a  total  of  17  clearing  houses 
with  198  members,  the  amount  of  paper  presented  for 
clearing  had  increased  to  10,531,271  from  1,979,012  in 
1884,  and  the  total  sum  cleared  from  12,130,196,000 
marks  in  1884  to  45,960,854,400  marks  in  1908. 

In  the  three  foreign  financial  centers,  the  total  value  of 
clearances  was  as  follows: 


1884. 

1907. 

France  (Chambre  de  Compensation  des 
Banquiers  de  Paris)  . 

Marks. 
3>  35S»  4'5>  ooo 

Marks. 

England  (London  Bankers'  Clearing 
house  comprising  City,  Country,  and 
Metropolitan  Clearing  

118,  464,  479,  ooo 

260  081   929   ooo 

United  States  (Associated  New  York 
Clearing-house  banks).  .  _  _ 

143,  186,  557,  ooo 

1/43  366   165    106  ooo 

The  small  amount  cleared  at  the  German  clearing 
houses  at  the  present  time  as  compared  with  the  clear- 
ing houses  of  the  two  last-mentioned  countries  is  due  on 
the  one  hand  to  the  gratifying  circumstance  that  large 
payments  in  Germany  are  effected  with  outside  places  by 
means  of  "giro"  accounts,  or  transfers  on  the  books  of 


148 


The     G  .e  r  m  a  n     Great    Banks 

the  Reichsbank  or  post-office,  and  on  the  other  hand 
to  the  less  gratifying  fact  that  payments  in  Germany 
are  much  less  effected  by  means  of  checks  which  in  turn 
would  pass  through  the  clearing  houses. 

It  should  be  stated,  though,  that  the  check  law  of 
March  n,  1908,  passed  after  protracted  opposition,  has 
removed  a  series  of  obstacles  that  have  hitherto  stood  in 
the  way  of  the  development  of  the  check  system  in 
Germany. 

The  total  turnover  of  the  Reichsbank  144  amounted  in 
1908  to  305,244,504,000  marks, or,  in  round  figures,  305  X 
billion  marks,  as  compared  with  about  47 X  billion  marks 
in  1877  and  about  142  billion  marks  in  1897;  in  these 
total  turnovers,  cash  payments  are  superseded  by  "giro" 
transfers  to  a  constantly  growing  extent.  Thus  the 
volume  of  giro  transactions  increased  from  41  billion 
marks  in  1886  to  188  billons  in  1905,  and  it  is  due  mainly 
to  this  circumstance  that  the  Reichsbank  has  been  able 
to  operate  with  a  relatively  small  amount  of  bank  notes 
even  in  periods  of  increased  business  activity. 

The  doubling  of  German  bank-note  circulation  in  1907, 
as  compared  with  the  average  for  1881-1885 — despite 
the  great  increase  in  gold  coinage  and  in  the  extent  of 
the  giro  transactions,  is  a  clear  proof  of  the  enormous 
growth  of  the  requirements  for  means  of  payment  on  the 
part  of  the  greatly  increased  population  during  the  period 
under  consideration. 


149 


National     Monetary     Commission 


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150 


The     German     Great    Banks 


The  reserves  of  the  Reichsbank  for  the  issue  of  bank 
notes  amounted  to — 


Cash. 

Metal. 

Gold. 

Aver- 
age. 

High- 
est. 

Low- 
est. 

Aver- 
age. 

High- 
est. 

Low- 
est. 

Aver- 
age. 

High- 
est. 

Low- 
est. 

1876-1880 

Per 

cent. 

85.0 

Per 
cent. 

104.  3 

Per 
cent  . 

66.  i 

Per 

cent. 

77-  i 

Per 
cent. 

96.  3 

Per 
cent. 

62.4 

Per 

cent. 

34.  o 

Per 
cent. 

54.  4 

Per 

cent. 

22.5 

1896—1900--        -     _- 

79.  5 

102.  9 

51.9 

76.4 

99-  4 

49-  7 

52.  4 

71.  7 

32.6 

1908 

72.  8 

89.  4 

49-  9 

66.9 

82.6 

44.  2 

51.5 

65.6 

32.0 

As  compared  with  this,  the  note  issue  reserves  held  by 
the  banks  of  France  and  England  were  as  follows : 


Bank  of  France. 

Bank  of  England. 

Metal. 

Gold. 

Metal. 

Gold. 

1876-1888                             -                   _    - 

Per  cent. 
87.8 
84.! 
76.3 

Per  cent. 

Per  cent. 
99-0 
129.  9 
120.  5 

Per  cent. 
98.3 
129.  i 
117.  7 

1886—1900.     -  .-.     .-       _    -    

52.0 
56.2 

1907 

The  proportion  of  reserves  of  the  Reichsbank  to  bank 
notes  and  other  moneys  falling  due  daily  (the  giro  assets 
in  the  first  instance)  was: 


Cash. 

Metal. 

Gold. 

Aver- 
age. 

High- 
est. 

Low- 
est. 

Aver- 
age. 

High- 
•est. 

Low- 
est. 

Aver- 
age. 

High- 
est. 

Low- 
est. 

1876-1880  

66.  2 

73  •  ° 

53-  2 

60.  o 

69.  3 

52.1 

26   5 

1896—1900 

55    i 

68   i 

38  5 

52   9 

6c    7 

36   8 

36   i 

1908  

51.0 

58.  2 

38.  2 

46.  9 

53  •  7 

33.8 

36   i 

42  6 

151 


National    Monetary     Commission 

This  proportion  in  the  case  of  the  other  two  banks  was 
as  follows: 


Bank  of  France. 

Bank  of  England. 

Metal. 

Gold. 

Metal. 

Gold. 

69.8 
69.  7 
65.8 

46.5 
44-  9 
42.  i 

46.  i 
44-8 

41.  2 

43-  i 
48.5 

1907    ..       -       --  -  

The  average  amount  of  gold  in  hand  at  the  Reichsbank 
(current  gold-coin  of  the  Empire,  bars,  foreign  coin,  etc.) 
during  the  period  in  question  was: 


Amount. 

Per  cent 
of  the 
total 
stock  of 
bullion. 

1876—1880                .             .          .          .          .               ....          .... 

Marks. 
23  i  ,  593  ,  ooo 

44    I 

1881-1885  ,  

1886—1890 

251,  092,  ooo 

43-5 
63    6 

1891—1895  

61  i  ,  296  ooo 

66.  i 

1896—1900  

584,  091  ,  ooo 

68.  6 

693   561   ooo 

73   8 

1908  

785,  195.000 

77-  i 

The  amount  of  Reichsbank  notes  in  circulation  unse- 
cured 145  by  cash  146  or  metal 147  is  rightly  regarded  as 
the  real  "elastic"  part  of  the  whole  note  issue,  as  it 
adapts  itself  very  closely  to  the  varying  state  of  the 
market,  and  the  requirements  of  the  business  community, 
the  varying  amounts  forming  a  very  reliable  gauge  of  the 
state  of  and  fluctuations  in  the  demand  for  means  of 
payment. 

The  following  tables  may  serve  as  illustration. 


152 


The     German     Great    Banks 


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In  1907  the  greatest  amount  of  gold  in  hand  was 
759,181,000  marks  (on  May  23),  and  the  lowest  amount 
471,848,000  marks  (on  November  30). 

The  average  metallic  reserve  was : 

Marks. 

1876 510,593,  ooo 

1880 _. -  .  _  _   .  562,  091,  ooo 

1881 .  .__  556,749,000 

1885 .         ....__  586,131,000 

1886 693,105,000 

1890 801, 019,  ooo 

1895 1,011,763,000 

1 896 89 1,  988,  ooo 

1 900 817,  137,  ooo 

1901 91 1,  41 1,  ooo 

1905 —  -__     972,959,000 

1908 i, 019, 065, ooo 

The  differences  (Spannung)  between  the  official  rate  of 
discount  and  the  private  rate  (market  discount)  averaged 
by  four-year  periods  as  follows: 


Berlin. 

Paris. 

'  London. 

Per  cent. 

Per  cent. 

Per  cent. 

1876-1880  

i.  19 

0.51 

0.51 

1881-1885 

o  98 

1886-1890 

i  04 

1891-1895  

i.  ii 

o-SS 

1.03 

1896-1900  

o.  71 

o.  09 

o.  60 

1905  ....                     

o.  97 

o.  90 

o   35 

1906  

i.  ii 

o.  28 

O.  22 

1907 

1908  

i.  23 

o.  79 

o.  70 

155 


National     Monetary     Commissio 


n 


The  average  rates  of  discount  of  the  central  Banks  in 
Germany,  France,  and  England  since  the  institution  of 
the  Reichsbank  was  as  follows — 


Reichs- 
bauk. 

Bank  of 
France. 

Bank  of 

England. 

1876 

Per  cent. 
4.  16 

Per  cent. 

Percent. 

1877  ..    ....   

4-  42 

2  28 

1878 

4  34 

7   78 

1879 

2  <;8 

1880 

4  24 
4   4 

2  8l 

2  76 

1881  :  

4.  42 

3  &4 

3  48 

1882 

4  54 

o   go 

1883  .  .  

4.  05 

3  08 

1884 

2  06 

1885  .  .  .   

4.12 

1886 

3  28 

1887  ...  

3  •  4i 

*  -28 

1888  : 

3-32 

3  10 

1889  .  .  . 

3.  68 

1890  .  

4.  52 

1891  . 

3  ?8 

1892  ..__  .  .  .  

3  •  20 

1893 

1894  

3  12 

1895 

1896  

3  66 

2  48 

1897 

-,  gj 

2  6^ 

1898  

1899 

1900  

*  06 

1901 

1902  . 

1903 

,  84 

1904  .  _ 

1905  .  _ 

3  82 

1906  

3-  oo 

1907  _ 

7   A& 

1908.-.  __ 

•03 

In  1906  the  rate  of  the  Bank  of  France  was  3.00,  and 
that  of  the  Bank  of  England  4.27;  the  rate  in  1907  of  the 
Bank  of  France  was  3.46,  and  that  of  the  Bank  of  England 


156 


The     German     Great    Banks 

was  4.93;  and  in  1908  the  rate  of  the  Bank  of  France  was 
3.04,  and  the  rate  of  the  Bank  of  England  was  3.01  per 
cent. 

The  private  rate  of  discount  (market  discount)  averaged 
as  follows : 


Berlin. 


Per  cent. 

1876 3.04 

1877 3.17  | 

1878 3.07  I 

1879 2.60 

1880 3.04  ! 

1881 3.50  | 

1882 3.89  | 

1 883 3.08 

1884 2.  90 

1885 2.85 

1886 2.16  j 

1887 2.30 

1888 2.  II 

1 889 2.  63 

1890 3.78 

l89I 3.02 

1892 _.  I.  80 

1893 3.17 

1894 1.74 

1895 2.01 

I  896 3.04 

1897 3.09 

1898 3.5S 

1899 4.  45 

1900 4.41 

1901 3.  06 

1902 2.  19 

1903 3.01 

1904 3.  14 

1 905 2.85 

1 906 4.04 

1907 5.12 

1908 3.52 


Paris. 


Per  cent. 
2.25 
1-75 

2.00 
2.25 

2.50 

3-75 
3-38 
2.56 
2.42 
2.46 
2.23 
2.42 
2-75 
2.65 
2.64 
2.58 
1.83 

2.  22 

i.  77 
1.63 
1.83 

1.  96 

2.  12 
2.  96 
3-  17 
2.48 

2-43 
2.78 
2.  19 

2.  10 
2.72 

3-  40 

2-  25 


London. 


Per  cent. 
2.25 
2.25 
3-50 
1-75 
2.25 
2.88 
2-38 

3-  00 
2.  60 
2.  04 
2.05 
2.36 
2.38 
2.  70 

3-68 
2.50 

1.  47 

2.  10 
o.  97 
o.  81 
1-52 
1.87 
2.65 
3-29 
3-70 

3-20 

2.99 

3-40 

2.  70 

2.66 

4.05 

4-  53 
2.31 


National    Monetary     Commissio 


n 


The  average  bill  investments  of  the  Reichsbank 
amounted  to — 

Marks. 

1876-1880 356,  518,000 

1881-1885  .  ? 366,  955,  ooo 

1886-1890 463,214,000 

1891-1895 554,  142,  ooo 

1896-1900 724,  438,  ooo 

1901-1905 839,  752,  ooo 

1906 989, 445,  ooo 

1907 i ,  104,  537,  ooo 

1908 967,  729,  ooo 

Since  a  central  note  bank  always  has  to  be  in  a  position 
to  redeem  its  notes  (covered  according  to  law  in  a  special 
manner)  on  presentation,  and  to  meet  its  other  daily 
obligations  (for  which  the  mode  of  covering  is  not  pre- 
scribed by  law) ,  the  general  principle  ought  to  be  observed 
that,  in  so  far  as  the  law  does  not  permit  exceptions,  its 
credit  business  must  be  strictly  in  keeping  with  its  debit 
business,  a  principle  which  need  not  be  so  strictly  main- 
tained by  the  credit  banks. 

Accordingly  a  central  note  bank  should  grant  short- 
time  credit  only,  either  by  discounting  short-term  bills 
or  by  making  short-time  loans  on  collateral. 

The  discounting  of  short-term  bills  ought  to  occupy  the 
first  place  in  the  credit  business  of  the  Reichsbank,  as 
the  latter  is  bound  under  section  17  of  the  bank  law  to 
secure,  by  short-term  bills,  two-thirds  of  the  notes  it  issues. 
The  Reichsbank  in  the  course  of  time  has  acquired  a 
constantly  growing  percentage  of  the  entire  number  of 
outstanding  bills.  It  is  thus  able  to  extend  its  note  cir- 
culation, as  the  short-term  bills  falling  due  provide  it 
continually  with  the  means  of  redeeming  its  bank  notes. 


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The     German     Great    Banks 

Collateral  credit  business  at  the  Reichsbank  is  relegated 
to  a  secondary  position,  since  collateral  claims,  for  obvious 
reasons,148  can  not  be  used  as  reserve  for  notes.  Never- 
theless, collateral  credit  (which  is  likewise  granted  for  three 
months  only)  is  normally  less  expensive  to  the  debtor, 
although  since  1896  the  rate  of  interest  on  collateral  loans 
has  been  i  per  cent  higher  than  bank  discount,  for  the 
reason  that  interest  on  loans  on  collateral  is  computed 
only  for  the  actual  duration  of  such  loans,  and  that  the 
debtor  may  repay  at  any  time  part  or  the  whole  of  the 
loan.  Lending  money  on  merchandise  has  been  discarded 
more  and  more  in  favor  of  lending  money  on  securities. 
Thus  at  the  end  of  1908  only  5,390,100  marks  were  loans 
on  merchandise,  whereas  170,533,650  marks  were  loans 
on  securities.  The  amount  of  loans  on  collateral,  as  a 
whole,  rose  almost  constantly,  as  follows: 


Amount  of  loans 
on  collateral 
made. 

Annual  aver- 
age out- 
standing. 

1904                   -    --       -               -    -       -    

Marks. 
1  »  957»  41  1  »  820 

Marks. 

1905 

1906                                  __          -    .       --       -          -._- 

2,  773  ,  191  ,  475 

1908  (decrease  of  the  total  and  of  the  annual  average)  _- 

2,  8l2,  171,450 

9i»  397.  ooo 

Apart  from  the  possible  difficulties  of  realisation,  it 
involves  greater  risk  for  the  bank  to  grant  credit  on  collat- 
eral than  bill  credit,  as  the  nature  of  the  credit  required 
cannot  be  recognised  so  easily  as  in  the  case  of  bills. 

In  granting  short-term  credit  it  is  incumbent  on  the 
Reichsbank  administration  to  aim  at  regulating,  through 
the  interest  or  discount  rate,  the  domestic  demand  for 


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National    Monetary     Commission 

short-term  credit  which  concentrates  at  the  Reichsbank 
and  which  is  expressed  to  a  great  extent  in  its  bill  invest- 
ments. 

When  credit  is  rendered  more  expensive  by  a  high  dis- 
count rate,  which  latter  naturally  influences  immediately 
the  rate  on  loans  on  collateral  and,  gradually,  general 
interest  rates  throughout  the  country,  excessive  demands 
for  credit  at  home,  as  well  as  excessive  speculation,  over- 
production, and  overvaluation  of  goods  and  securities 
are  restricted  to  a  certain  extent.  Provided  that  the 
private  rate  of  discount  is  high,  and  that  exceptional 
circumstances  (similar  to  those  in  1907)  do  not  intervene, 
a  high  Reichsbank  rate  of  discount  can  also  check,  di- 
minish, or  retard  the  outflow  of  gold  to  foreign  coun- 
tries.149 As  a  rule,  however,  it  will  not  cause  gold  to  be 
imported  from  abroad,  unless  domestic  discount  rates  are 
raised  far  higher  than  those  abroad,  and  private  rates  of 
discount  are  raised  correspondingly  and  kept  at  a  corre- 
sponding height.  In  all  other  cases  "screwing  up  the 
discount  rate"  will  not  cause  gold  to  flow  in  from  abroad, 
but  merely  prevent  temporarily  a  further  increase  in  the 
foreign  exchange  rate,  thus  preventing  or  postponing  the 
advent  of  the  moment  when  the  export  of  gold  might 
become  profitable.150 

Complaints  have  been  made  against  the  Reichsbank  for 
having  raised  the  bank  rate  (especially  in  1907)  without 
necessity,  at  "all  events  for  having  maintained  it  at  an 
exorbitant  height,  thus  severely  injuring  the  interests  of 
trade,  industry,  and  agriculture. 

It  was  also  stated  that  the  Reichsbank  was  too  obliging 
as  far  as  credit  demands  were  concerned,  particularly 


1 60 


The     German     Great    Banks 


toward  the  credit  banks,  and  the  average  amount  of  its 
bill  investments  in  1907  (1,104,537,000  marks)  and  of  its 
investments  in  collateral151  (98,140,000  marks)  were 
pointed  to  as  a  proof  of  the  complaint.  In  particular  at 
the  so-called  " heavy  terms"  (schwere  T ermine)  (the  first 
day  of  the  quarters;  also  the  fortnights  from  Septem- 
ber 15  to  30  and  December  15  to  30)  it  was  said  to 
have  weakened  its  position  unnecessarily  by  granting 
bill  and  collateral  credit  of  too  comprehensive  a  nature, 
and  that  it  discounted  a  great  number  of  financial, 
credit,  and  nominal  bills  (Leerwechset) — i.  e.,  such  bills, 
as  were  not  based  upon  real,  bona  fide  commercial 
transactions. 

Finally  it  was  urged  that,  because  of  its  limited  holdings 
of  foreign  bills,  the  Reichsbank  was  unable  to  exercise 
any  appreciable,  even  if  only  temporary,  pressure  upon 
the  rate  of  exchange,  whenever  this  rate  had  gone  beyond 
the  "upper  gold  point,"  or  tended  in  that  direction;  that 
it  was  therefore  not  in  a  position  to  pursue  an  independent 
foreign  bill  policy  (Demsenpolitik) ,  which  was  demanded 
by  the  circumstances,  or  at  least  to  support  and  supple- 
ment its  discount  policy  by  means  of  a  corresponding 
foreign  bill  policy,  even  though  subject  to  the  same 
limitations  as  its  discount  policy. 

I  consider  that  the  proceedings  of  the  bank  inquiry 
commission  instituted  by  the  Government  in  1908  at  the 
instigation  of  the  Reichstag,  and  the  statements  of  the 
experts  examined  at  that  time,  go  to  show  that  only  the 
last  mentioned  objection  can  be  sustained,  and  that  only 
to  a  limited  extent. 


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National     Monetary     Commission 

The  amounts  of  foreign  bills  held  by  the  Reichsbank 
since  1876  were  as  follows: 

Marks. 

1876 1,672,000 

1877 i , 873,  ooo 

1878 5,351,000 

1879 3,  560,  ooo 

1880 9,584,000 

1881 7,481,000 

1882 5, 59°>  00° 

1883 4,  004,  ooo 

1884 4. 63 i » °°° 

1885 7,951,000 

1886 16,  961,  ooo 

1887 7,  864,000 

1888 3,316,000 

1 889 3,  798,  ooo 

1890 5,420,000 

1891 5,  306,  ooo 

1892 4,715,000 

1893 4,113,000 

1 894 2,  540,  000 

1895 2,569,000 

1 896 2,753,  ooo 

1897 2,411,000 

1 898 4,  934,  ooo 

1899 19, 045, ooo 

1900 26,  753,000 

1901 26,  946,  ooo 

1902 22,  733,000 

1903 24,  068,  ooo 

1904 22,  212,  OOO 

1905 33,093,000 

1906 43,244,000 

1907 44,  461,  ooo 

1 908 70, 88 1 ,  ooo 

On  the  other  hand,  as  a  result  of  the  deliberations  of  the 
bank  inquiry  commission,  it  has  been  firmly  established 
that,  on  the  whole,  the  Reichsbank  has  not  gone  too  far  in 
the  amount  of  credit  granted,  although  it  was  considered 
advisable  that  in  the  future  stricter  principles  should  be 
observed  in  discounting  bills,  and  that  the  discounting  of 


162 


The     German     Great    Banks 

long-term  bills  and  the  granting  of  any  kind  of  permanent 
credit  should,  at  least  on  principle,  be  abandoned. 

Neither  could  it  be  proved  that  the  Reichsbank  during 
1907  had  raised  the  discount  rate  arbitrarily.  On  the  con- 
trary, the  majority  of  the  members  of  the  bank  inquiry 
commission,  and  of  the  experts  examined,  were  of  the 
opinion  that  the  raise  of  discount  rates  was  in  the  main 
only  the  natural  and  necessary  consequence  of  industrial 
credit  requirements,  which  in  turn  were  not  arbitrary,  but 
for  the  greater  part  legitimate  and  necessary,  and  that 
had  the  discount  rate  not  been  raised,  the  situation  of  the 
Reichsbank  would  have  been  much  worse,  and  the  drain 
of  gold  much  larger.  As  a  matter  of  fact,  the  fixing  of 
the  discount  rate  by  the  Reichsbank  has  solely  a  ' '  declar- 
atory," and  not  a  "normative"  (konstitutive)  significance. 

The  majority  referred  to  were  decidedly  of  the  opinion 
that,  for  the  same  reasons,  the  continued  high  rate  of 
discount,  although  much  to  be  regretted,  was  a  necessity. 
In  the  course  of  the  deliberations  it  became  necessary  even 
for  the  most  outspoken  advocates  to  abandon  the  view 
that  the  Reichsbank  ought  not  to  comply  fully  with  the 
sudden  and  abnormally  large  demands  for  credit  that 
arise  at  the  so-called  "heavy  terms"  (schwere  T ermine), 
and  which  come  principally  from  the  credit  banks. 

It  will  hardly  be  denied  that  the  credit  requirements 
at  the  so-called  "heavy  terms"  are  particularly  legiti- 
mate and  such  as  can  not  be  deferred,  and  that  these 
requirements  are  met  at  the  time  by  the  Reichsbank  in 
the  shape  of  short-term  discount  and  collateral  credit. 
These  requirements  are:  the  credit  demands  on  the  first 
day  of  each  quarter,  when,  in  accordance  with  German 


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National     Monetary     Commission 

custom,  rents,  mortgage  interest,  salaries,  wages,  interest 
payments,  coupons,  and  frequently  bills,  etc.,  fall  due,  and 
between  the  i5th  and  3Oth  of  September  and  December, 
the  periods  characterized  by  a  similar  natural  increase  of 
credit  demands  on  the  part  of  all  business  interests. 

The  fact  that  the  credit  banks  fall  back  to  a  very  con- 
siderable extent  on  the  Reichsbank  just  at  those  periods 
is  a  necessary  consequence  of  their  being  the  agents  of 
the  credit  requirements  of  trade  and  industry,  and  that, 
accordingly,  the  assistance  sought  is  mostly  for  the  satis- 
faction of  the  above  requirements — i.  e.,  the  needs  of 
third  parties — and  only  to  a  relatively  small  extent  for 
their  own  uses. 

This  does  not  prevent,  however,  the  recognition  of  the 
fact  that  the  credit  banks  (as  may,  however,  happen  under 
every  system  of  banking)  have  frequently  been  too  liberal 
in  satisfying  the  credit  requirements  of  trade  and  industry, 
and  this  not  only  in  cases  where  operating  credit  was 
granted  hi  the  shape  of  short-term  credit,  but  also  in  cases 
where  investment  credit  was  concerned,  which  in  the  early 
stages  may  have  worn  the  garb  of  operating  credit  and 
developed  only  little  by  little  into  permanent  investment 
credit. 

Nor  is  there  any  doubt  that  the  demands  made  on  the 
money  market,  and  above  all,  on  the  Reichsbank,  were 
frequently  increased  by  a  superabundance  of  issues, 
promotions  and  transformations  that  were  not  always 
justified. 

As  far  as  the  resources  of  the  Reichsbank  were  con- 
cerned, the  majority  of  the  commission  proposed  that 
these  should  be  increased,  though  it  was  deemed  advis- 


164 


The     German     Great    Banks 

able  to  effect  this  increase  by  a  gradual  increase  of  the 
surplus  instead  of  an  increase  of  capital. 

In  addition,  it  was  considered  advisable  that  section  2 
of  the  bank  law  should  be  changed,  and  that,  following  the 
example  of  England  and  France,  the  bank  notes  issued  by 
the  Reichsbank  should  equally  be  declared  legal  tender. 
Naturally,  the  obligation  of  the  Reichsbank  to  redeem  its 
bank  notes  hi  gold  was  to  remain  and,  if  possible,  be  even 
more  sharply  emphasised. 

The  necessary  proposals  in  these  two  directions  are  con- 
tained in  the  draft  of  a  bill  (art.  i ,  par.  2 ;  arts.  3  and  4) 
laid  before  the  Reichstag  hi  February,  1908,  and  since 
made  law,  containing  amendments  to  the  bank  act. 
(Entwurf  eines  Gesetzes  betreffend  Aenderung  des  Bank- 
gesetzes. — Reichstag  document,  No.  1178.)  The  provi- 
sion, however,  in  force  in  England — which  I  consider  both 
necessary  for  and  practicable  in  Germany,  notwithstand- 
ing the  argument  to  the  contrary  found  on  page  12  of  the 
report  of  the  bill — according  to  which  bank  notes  are  not 
to  be  legal  tender  for  payments  made  in  its  giro  and  bank- 
note transactions  by  the  Reichsbank  itself,  has  been  un- 
justifiably omitted.  Further,  the  draft  authorises  the 
-Reichsbank  to  buy  checks,  provided  that  two  persons  of 
known  solvency  are  responsible  for  the  same,  an  authority 
which  the  bank  did  not  possess  until  then.  This  latter 
measure  is  also  in  accordance  with  the  views  of  the 
majority  of  the  members  of  the  bank  commission.  On 
the  other  hand,  the  permission  granted  by  article  5,  Sec- 
tion III,  of  the  act  of  June,  1909,  to  use  checks  (which 
in  distinction  to  bills  can  not  be  accepted)  as  part  of  the 
note  reserve  seems  to  be  of  doubtful  wisdom.  Finally, 


National    Monetary     Commission 

article  2  of  the  act  provides  for  an  increase  of  the  tax-free 
"contingent"  of  uncovered  bank  notes  of  the  Reichsbank 
from  the  present  amount  (472,829,000  marks)  to  550,- 
000,000  marks,  so  that  the  bank  will  have  to  pay  the 
5  per  cent  tax  merely  on  the  amount  by  which  its  note 
circulation  exceeds  its  cash  reserve  (see  note  145)  plus 
this  note  contingent  of  550,000,000  marks.  The  system 
of  a  tax-free  note  contingent  has  thus  been  upheld,  it 
having  been  proved  that  this  factor  has  had  no  influence 
upon  the  discount  policy  of  the  bank.  The  Govern- 
ment and  the  majority  of  the  commission  were  of  the 
opinion  that  the  passing  of  the  bounds  of  the  tax-free 
contingent  was  serving  as  a  danger  signal  to  the  commer- 
cial public,  although,  as  a  matter  of  fact,  from  1891 
(before  which  date  the  bounds  were  never  exceeded)  till 
1907  inclusive,  this  limit  has  been  exceeded  not  less  than 
164  times.152  The  last-named  fact  may  therefore  be  said 
to  have  brought  about  merely  an  increase  of  the  tax-free 
note  contingent. 

In  concluding  this  review  of  the  activity  of  the  Reichs- 
bank during  the  period  under  consideration,  it  must  be 
acknowledged  that  the  regulation  of  our  money  circulation, 
and  of  our  systems  of  payments,  credit  and  currency, 
with  which  that  institution  had  been  intrusted,  has  been 
in  good  hands.  In  particular  it  may  be  said  that  by 
means  of  a  circumspect  discount  policy,  by  opportune  and 
energetic  intervention  in  1900  as  well  as  in  1907,  i.  e., 
during  the  most  critical  periods,  the  bank  has  been  of  the 
greatest  aid  in  preserving  the  German  money  market  and 
the  entire  economic  organisation  from  lasting  disturbances 
of  the  gravest  character. 


166 


The     German     Great    Banks 

The  above  review  of  the  most  important  factors  which 
influenced  the  development  of  industry  and  banking  in 
Germany  during  the  period  in  question,  would  be  quite 
incomplete  without  a  brief  reference  to  the. 
during  this  era,154  and  especially  to  those  formed  begin- 
ning with  the  period  1 8 73-1 8 75. 153  These  combinations, 
developed  to  an  enormous  extent  in  German  industry, 
and  their  growth  was  due  in  a  great  measure  to  the  direct 
influence  of  the  German  credit  banks. 

Cartels  in  the  great  majority  of  cases  are  either 
"necessity's  offspring"  or  at  least  due  to  its  influence 
or  after-effects.156 

They  are  associations,  founded  by  contract  for  certain 
periods  of  time,  of  independent  enterprises  belonging  to 
kindred  branches  of  industry  or  of  branches  of  industry 
with  nearly  identical  interests,157  the  individual  members 
of  the  association  retaining  their  independence  but  join- 
ing for  the  purpose  of  regulating  production  and  sales 
according  to  common  points  of  view  and  in  the  common 
interest. 

A  sharp  distinction  must  be  drawn  (at  least  outwardly 
and  legally)  between  cartels  and  trusts,  for  the  latter 
although  following  the  same  aims 158  represent  permanent 
and  organic  combinations  of  undertakings  which  have 
sacrificed  their  independence,  and  do  not  always  belong 
to  the  same  branches  of  industry,  but  possess  common 
interests. 

Cartels  are  formed  principally  in  branches  of  industry 
which,  like  the  mining  and  chemical  industries,  produce 
staple  articles  (vertretbare  Artiket),  and  in  large  quanti- 
ties (Massengiiter).  Their  formation  is  rarest  and  most 


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National    Monetary     Commission 

difficult  in  branches  of  industry  producing  special  articles, 
or  which  work  up  half -manufactured  articles. 

Furthermore,  cartels  are  formed  most  rapidly  and 
easily  in  those  industries  engaged  in  the  production  of 
staple  articles,  which  show  an  organic,  local,  or  capitalist 
concentration  into  a  limited  number  of  large  or  "giant" 
concerns  (Riesenbetriebe) ;  this  has  been  the  case  for  some 
time  in  the  mining  industry,  and  more  recently  in  the 
chemical  industry. 

The  formation  of  cartels  is  slowest  and  most  difficult  in 
cases  where  both  conditions — i.  e.,  the  production  of 
staple  goods,  and  a  limited  number  of  large  works — are 
lacking.  It  is  more  difficult  and  unwieldy  where  a  con- 
siderable number  of  middle-sized,  and  small  (and  more- 
over scattered)  works  exist  side  by  side  with  large 
concerns  (Grossbetriebe) . 

The  "  necessity  "  for  the  formation  of  cartels  in  Germany 
was  clearly  recognized,  especially  during  the  crisis  of  1873, 
as  a  result  of  the  economic  situation;  by  this  means 
overproduction  at  home  and  ruinously  cheap  prices  were 
to  be  terminated;  this  "necessity"  likewise  was  the 
origin  of  the  protective-tariff  movement  of  the  seventies, 
which  was  intended  to  ward  off,  or  decrease  foreign  com- 
petition. The  simultaneous  introduction  of  a  protective 
system  of  duties  is  by  no  means  indispensable  for  the 
formation  of  cartels,  at  least  not  in  the  case  of  strongly 
developed  industries,  as  may  be  seen  in  the  case  of  Eng- 
land. It  seems  to  be  only  an  attendant  feature,  easily 
accounted  for,  in  case  of  feeble  industries,  and  which,  in 
some  degree  certainly,  is  likely  to  promote  the  formation 
of  cartels. 


168 


The     German     Great    Banks 


It  is  quite  correct,  and  has  been  conclusively  proved  by 
Bering,  that  at  certain  times,  and  under  certain  supposi- 
tions the  iron  industry  in  particular  can  not  dispense  with 
protective  duties,  and  that  well-organized  cartels  enable 
protective  duties  to  become  effective  in  favor  of  producers. 
More  than  this,  however,  can  not  be  said;  consequently 
the  assertion  that  the  organized  iron  or  steel  industries 
can  attain  their  aims  only  "under  the  system  of  protect- 
ive duties  " 159  is  in  my  opinion  incorrect. 

No  official  statistics  existed  up  to  the  end  of  1905  regard- 
ing the  total  number  of  cartels  established  in  the  German 
industry,  consequently  the  figures  found  scattered  here 
and  there  for  earlier  years  must  be  accepted  with  reserve. 

In  1896  there  are  said  to  have  been  250  cartels  in  the 
whole  German  industry,160  one-fourth  of  which  belonged 
to  the  iron  and  chemical  industries,  one-sixth  to  the 
earthen  and  stone  industries,  and  one-ninth  to  the  textile 
industries. 

According  to  investigations  made  in  the  iron  industry, 
which,  however,  can  not  be  regarded  as  exhaustive,  44 
cartels  (conventions,  syndicates)  existed  in  that  industry 
in  1903. 

In  the  statistics  contained  in  the  Denkschrift  uber  das 
Kartellwesen  (p.  24),  laid  before  the  Reichstag  during 
December,  1905,  the  number  of  domestic  cartels  is  stated 
to  be  385,  divided  as  follows: 

Coal  industry,  19;  iron  industry,  62;  metal  industry 
(excluding  iron),  n  ;  chemical  industry,  46;  textile  indus- 
try, 31;  leather  and  india-rubber  industries,  6;  wood 
industry,  5;  paper  industry,  6;  glass  industry,  10;  brick- 
making  industry,  132;  earths  and  stone  industry,  27; 


169 


National     Monetary     Commission 

earthenware  industry,  4;  food  and  delicacies,  17;  elec- 
trical industry,  2;  miscellaneous,  7.  About  12,000  works 
participated  directly  in  these  cartels  (p.  25). 

Numerous  complaints  before,  during,  and  after  the 
serious  crisis  of  1900  among  nonorganized  branches  of 
industry,  as  well  as  in  wider  circles,  against  the  price 
policy  pursued  by  the  cartels,161  led  to  serious  charges 
against  the  cartel  system,  and  ultimately,  as  usual,  to  its 
absolute  condemnation  as  being  positively  detrimental  to 
the  public  welfare.  These  complaints  gave  rise  to  an 
official  investigation  by  the  imperial  home  office,  which 
lasted  from  November  14,  1902,  to  June  21,  1905.  The 
memorial  (Part  I)  elaborated  in  the  same  governmental 
department,  and  laid  before  the  Reichstag  on  November 
28,  1905,  simply  gives  a  review  of  the  existing  cartels 
in  Germany.162 

In  continuation  of  these  investigations,  it  was  pro- 
posed to  bring  out  a  compilation  of  the  legal  provisions 
and  regulations  applying  to  cartels  at  home  and  abroad, 
including  also  the  most  important  decisions  of  the  supreme 
tribunals.  Further,  the  results  of  the  official  inquiry 
were  to  be  tested  in  the  light  of  specially  prepared  price 
statistics.  The  material  was  to  be  brought  down  to 
date  "in  all  cases  where  the  conditions  determined  in 
the  investigation  had  changed,"  and,  if  necessary,  the 
material  gathered  was  to  be  supplemented  ' '  through  the 
extension  of  the  investigation  to  other  cartels."  (See 
p.  1 8  of  the  memorial  of  1905.) 

The  first  part  of  the  memorial  is  accompanied  by 
reprints  "of  all  available  by-laws  (Statuten),  company 
and  delivery  agreements,  etc.,  and  business  regulations" 


170 


The     German     Great    Banks 

pertaining  to  cartels  "  in  order  to  afford  an  insight  into  the 
forms  of  organisation  of  the  combinations"  (pp.  18-19). 

In  addition  to  the  associations  of  producers,  the  memo- 
rial treats  also  of  the  associations  of  consumers  and 
dealers. 

In  conformance  with  the  outlined  program,  Part  II 163 
of  the  memorial,  laid  before  the  Reichstag  on  March  25, 
1906,  contains  the  provisions  of  the  German  civil  and 
penal  laws,  including  the  decisions  of  the  supreme  court 
of  the  Empire.  Part  III,  submitted  to  the  Reichstag  on 
March  21,  i9oy,164  is  devoted  solely  to  a  review  of  the 
cartels  in  the  coal  industry. 

Finally,  Part  IV,  laid  before  the  Reichstag  on  Novem- 
ber 3,  I9o8,165  deals  with  the  foreign  cartel  laws,  including 
those  of  the  European  countries,  the  United  States,  and 
the  British  Colonies  (Australia,  New  Zealand,  Canada, 
and  Cape  Colony) . 

This  is  not  the  place  to  discuss  in  detail  the  results  of 
the  official  inquiries  preceding  the  publication  of  the 
memorial,  nor  the  inquiries  themselves,  which  by  no 
means  exhausted  all  aspects  of  the  subject,  especially 
the  important  question  of  export  bounties.  It  seems 
advisable,  however,  as  the  conclusions  drawn  from  this 
inquiry  are  likely  to  occupy  the  attention  of  the  legisla- 
tive authorities,  to  examine  some  of  the  questions  more 
closely.  It  should  be  stated  at  the  very  outset  that  in 
Germany,  as  opposed  to  the  United  States,  all  the  rail- 
ways are  state  property,  and  that  any  domination  over 
the  railway  tariffs  by  the  cartels  is  out  of  the  question. 

According  to  my  conviction,  the  official  inquiry  has 
established  the  following  preliminary  conclusions. 


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National    Monetary     Commission 

The  charge  brought  against  the  Rhenish  Westphalian 
Coal  Syndicate  of  having  raised  prices  too  high  and  too 
rapidly  during  the  years  of  greatest  trade  prosperity 
(Hochkunjunktur)  viz,  1898-1900  was  proved  unfounded; 
as  to  the  complaint  that  it  did  not  reduce  prices  suffi- 
ciently and  speedily  enough  after  the  crisis,  no  common 
ground  for  the  conciliation  of  the  divergent  views  could 
be  found.166 

The  opinion  that  it  is  bad  policy,  unpatriotic,  and  in- 
compatible with  the  public  welfare  to  sell  goods  abroad 
at  lower  prices  than  at  home  can  be  regarded  as  refuted. 
In  the  event  of  overproduction  at  home,  sales  to  foreign 
countries  are  generally167  necessary  in  order  to  dispose  of 
the  surplus  home  production  and  to  relieve  the  home 
market  as  far  as  possible,  whereas  the  determination  of 
price  in  such  cases  is  governed  chiefly  by  foreign  compe- 
tition and  prices  prevailing  in  the  international  market. 
The  aim  of  the  seller  being  always  to  obtain  the  highest 
sale  price  possible,  it  may  therefore  be  assumed  as  a 
general  fact  that  the  regrettable  occurrence  of  foreign 
sales  being  effected  frequently  below  home  prices  and 
even  below  cost  is  solely  due  to  the  causes  just  named. 

On  the  other  hand,  I  am  of  opinion  that  the  following 
charges  have  been  proved:  The  cartels  in  -general,  and 
especially  those  in  the  mining  industry,  frequently  lacked 
all  close  touch  and  proper  connection  with  each  other,  so 
that  a  common  business  policy  was  out  of  question,  even 
if  for  these  reasons  only.  A  proper  policy  should  at  least 
have  set  itself  the  task  of  establishing  a  proper  relation  of 
prices  for  the  products  of  the  various  industrial  branches, 
especially  a  ratio  of  prices  for  raw  materials,  half-manu- 


172 


The     German     Great    Banks 


factured  wares,  and  finished  commodities.  Instead,  the 
coal  syndicate  pursued  its  own  price  policy  (which  was 
certainly  moderate  throughout)  without  reference  to  the 
coke  syndicate;  the  latter  in  turn  pursued  its  less  mod- 
erate price  policy  without  reference  to  the  pig-iron  syndi- 
cate,168 etc.  Such  a  common  business  policy,  moreover, 
was  out  of  question,  because  (a)  the  cartel  system 
(Kartellierung)  never  comprised  the  whole  process  of 
production,  i.  e.,  the  production  of  the  raw  material,  of 
the  partially  manufactured  goods,  and  the  finished  article, 
but  only  a  single  part,  or  parts,  of  the  process  of  produc- 
tion, and  because,  furthermore,  (6)  the  syndicate  contract 
frequently  excluded  a  whole  series  of  articles,  as  well  as 
all  foreign  business,  from  the  cartel's  sphere  of  influence. 

It  is  clear,  therefore,  that  the  increase  of  prices  fixed  for 
Germany  by  the  cartels  of  the  raw-material  industries 
benefited  at  first  those  cartels  only,  and  that  they  were 
able  to  dispose  of  their  home  surplus  in  foreign  markets  at 
prices  below  those  prevailing  in  these  markets,  and  some- 
times even  below  cost. 

In  the  iron  industry  these  facts  caused  considerable 
injury,  in  the  first  instance,  to  the  cartels  formed  in 
industries  following  in  the  process  of  production,  namely, 
the  production  of  partially  manufactured  goods.  These 
cartels  in  their  turn  endeavoured  as  much  as  possible  to 
shift  the  injury  to  their  consumers,  the  industries  follow- 
ing in  the  process  of  production,  i.  e.,  the  industries 
engaged  in  the  further  working  up  or  finishing  of  the 
partial  manufactures.  Hence,  it  followed  that  the  further 
an  industrial  branch  was  removed  from  the  beginning  of 
the  productive  process  the  more  intensely  it  was  injured  169 


173 


National    Monetary     Commission 

by  the  otherwise  consistent  (an  sich  naturgemasse)  business 
policy  of  the  raw-material  cartels  mentioned. 

The  unorganised  industry  of  the  more  highly  finished 
products,  therefore,  was  weakened  and  injured  to  a  high 
degree,  and  to  a  twofold  extent;  by  unrestrained  domestic 
competition  as  well  as  foreign  competition  on  the  one 
hand,  and  by  the  enforced  raising  of  home  prices  for  raw 
materials  and  partially  manufactured  materials  on  the 
other. 

A  considerable  number  of  these  evils  which  were  cal- 
culated to  counteract  the  essentially  true  purposes  aimed 
at  by  the  formation  of  cartels,  and  which  would  have  led 
eventually  to  the  disruption  of  the  cartels,170  have  been 
removed  at  least  for  a  certain  number  of  industries  by  the 
formation,  on  March  30,  1904  (retroactive  to  March  i),  of 
the  Steel  Works'  Union  (Stahlwerksverband,  Dusseldorf) , 
which  united  the  Serni-Manufactures  Producers'  Associa- 
tion (the  so-called  Halbzeugverband) ,  the  Girder  Manufac- 
turers' Association  (Trdgerverband) ,  and  the  Rail  and 
Sleeper  Combine,  the  total  production  of  which,  at  the 
time  of  its  foundation,  amounted  to  7,900,000  tons  (of 
1,000  kilograms).  The  advantage  of  this  union,171  which 
was  extended  on  April  30,  1907,  for  a  further  term  of  five 
years,  consists  principally  in  uniting  within  its  sphere  of 
activity  the  whole  German  output  of  partially  manufac- 
tured articles,  and  a  very  considerable  portion  of  the  roll- 
ing mills'  output.  Further  advantages  of  the  combination 
were  the  fact  that  all  the  works  belonging  to  the  union 
were  so-called  " mixed"  works  and  that  it  comprised  at 
least  some  of  the  mutually  dependent  cartels.  The  new 
combination  has  also  taken  in  hand  the  export  trade,  and 


174 


The     German     Great    Banks 

is  endeavouring,  in  conjunction  with  the  Rhenish  West- 
phalian  Coal  and  Iron  Syndicates  (by  means  of  contractual 
arrangements),  to  regulate  it  in  the  common  interest  by 
fixing  export  premiums  and  establishing  a  special  clearing 
house  for  exports .  The  export  premiums ,  which  amounted 
to  2.50  marks  per  ton,  were  abolished,  beginning  with 
July  i,  1907. 

The  union  also  has  the  avowed  intention,  carried  into 
effect  since  by  a  series  of  measures,  to  harmonise  as  far  as 
possible  its  own  business  policy,  and  more  especially  its 
price  policy,  with  that  of  the  cartels  following  or  preceding 
it  in  the  process  of  production.  In  particular  its  aim  is  to 
fix  the  prices  of  all  syndicate  products  in  accordance  with 
the  prices  of  the  raw  materials  in  such  a  manner  as  to  par- 
take of  the  benefit  of  the  customs  duty  while  showing  the 
utmost  regard  for  the  interests  of  the  industries  of  the 
more  highly  finished  products.172 

However,  according  to  the  memorials  of  February, 
1908, 173  and  June  the  5th,  1908,  presented  by  the  "pure" 
Martin  Steel  Works  (engaged  in  the  production  of  crude 
steel  only)  and  the  "pure"  rolling  mills  (which  only  roll 
steel  and  iron,  but  do  not  produce  the  iron  and  steel 
material) ,  to  the  Secretary  of  State  for  Home  Affairs  and 
to  the  Reichstag,  the  Steel  Works'  Union  had  shown  no 
consideration  for  the  interests  of  the  finishing  industry 
as  evidenced  in  many  instances.  It  was  stated  that  the 
Steel  Works'  Union,  with  the  object  of  suppressing  the 
"pure"  rolling  mills,  had  systematically  kept  the  home 
prices  of  half -finished  material  (the  so-called  "A"  products 
of  the  syndicate)  so  high  that  the  "pure "  rolling  mills  not 
only  had  no  profit,  but  at  times  a  clear  loss  in  the  sale  of 


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National    Monetary     Commission 

the  products  manufactured  from  this  half-finished  mate- 
rial. For,  simultaneously  with  the  rise  of  prices  for  the 
products  "A" — which  they  on  their  part  could  not  manu- 
facture (as  most  of  the  members  of  the  Steel  Works'  Union 
could) ,  but  had  to  purchase — there  had  been  a  fall  in  the 
selling  prices  of  the  products  "B"  of  the  Steel  Works' 
Union,  comprising  iron  plates  and  bar  iron,  the  sole 
product  of  the  "pure"  rolling  mills. 

The  entire  advantage  of  the  Steel  Works'  Union  de- 
pended on  the  duty-free  importation  of  such  raw  mate- 
rials as  coal  and  ore.  As  it  imported  the  latter  free  of 
duty  in  those  exceptional  cases  where  it  did  not  possess 
ore  of  its  own,  the  mixed  works  (Thomas  Steel  Works) 
were  able  to  keep  the  cost  of  their  products  below  that 
of  the  other  works. 

The  superiority  of  the  "mixed"  works  belonging  to 
the  Steel  Works'  Union,  it  was  claimed,  was  therefore  not 
based  exclusively  on  the  natural  advantages  of  concen- 
tration, but  chiefly  or  exclusively  on  the  fact  that  these 
works,  being  able  to  obtain  their  material  without  duty, 
made  a  selfish  and  wrong  use  of  the  duty  on  imported  pig 
iron,  half -finished,  and  scrap  iron  for  the  benefit  of  the 
syndicate  products  and  to  the  detriment  of  the  "pure" 
works.  In  the  opinion  of  the  "pure"  works,  these  duties 
were  unnecessary,  in  view  of  the  equally  high  cost  of  pro- 
duction abroad,  especially  in  England. 

This  superiority  of  the  mixed  works,  the  argument  went 
on,  rested  on  the  further  fact  that  although  the  cost  of 
material  to  the  pure  works  was  enhanced  by  the  amount 
of  the  import  duty,  the  former  made  it  impossible  for 
the  pure  works  to  realize  the  benefit  of  the  customs  duty 


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The     German     Great    Banks 

in  the  prices  of  their  products  by  refusing  to  sanction  the 
organization  in  a  syndicate  of  the  producers  of  finished 
iron,  especially  of  rolled  plates  and  bar  iron. 

Under  these  conditions  the  "pure"  Martin  Steel  Works 
and  the  "pure"  rolling  mills  demanded  at  one  time  a 
suspension  and  early  removal  of  the  import  duties  on  pig 
iron,  half -finished  iron,  and  scrap  iron  (cfr.  memorial  of 
5th  June,  1908),  and  at  another  (cfr.  memorial  of  Febru- 
ary, 1908) — the  introduction  of  import  certificates  for  pig 
iron  and  exported  articles  (i.  e.,  for  half -finished  articles- 
bar  iron,  plates,  and  wire) ,  by  which  means  they  could  at 
least  secure  to  themselves  the  unhampered  supply  of  ma- 
terial for  articles  to  be  exported. 

The  Steel  Works'  Union  pointed  out  in  its  answer  to  the 
above-mentioned  memorials  that  the  mixed  works  were 
at  a  considerable  disadvantage  as  compared  with  foreign 
countries,  both  as  to  general  conditions  of  production, 
especially  cost,  and  as  to  the  far  smaller  social  burdens 
imposed  abroad,  particularly  in  England.  A  compensation 
could  be  found  only  in  better  technical  arrangements,  in 
savings  in  the  cost  of  production  and  in  a  decrease  of  the 
cost  of  transportation. 

There  could  be  no  question  of  a  systematic  suppression 
of  the  "pure"  works.  This  might  be  seen  from  the  fact 
that  the  total  sales  of  half -finished  material  amounted  in 
1907,  to  1,200,000  tons,  whereas  the  firms  who  had  com- 
plained purchased  only  340,000  tons,  the  production  of 
which  required  the  services  of  only  5,000  workmen  of  the 
Steel  Works'  Union's  total  labor  force  of  360,000  men. 
Added  to  this  were  the  export  premiums  continually  paid 
by  the  Steel  Works'  Union  also  to  the  above-mentioned 

90311°— ii 13  177 


National    Monetary     Commission 

works,  which  helped  them  to  tide  over  bad  times,  to  say 
nothing  of  the  ever -increasing  deliveries  of  half-finished 
material  to  these  works  which  were  a  matter  of  record. 

The  cutting  of  prices  of  iron  bars  and  plates  very  often 
emanated  from  the  "pure"  rolling  mills,  in  fact  it  often 
exceeded  the  amount  of  the  export  bounties. 

It  was  a  matter  of  regret  that  owing  to  objections  of 
several  members  of  the  Steel  Works'  Union,  and  to  other 
obstacles,  the  desired  formation  of  bar  iron  and  plate  iron 
syndicates  had  not  become  possible.  The  removal  of 
duties  on  half -finished  material,  pig  iron,  and  scrap  iron 
desired  by  the  "pure"  works  would  result  merely  in  a 
dissolution  of  the  Steel  Works'  Union.  These  duties 
were  indispensable  as  a  protection  against  the  enormous 
power  of  the  American  steel  combination  against  the 
advancing  Russian  iron  industry,  and,  lastly,  against  the 
constantly  growing  British  protectionist  tendencies.  The 
abolition  of  the  duties  mentioned  would  prove  at  the 
same  time  of  general  disadvantage  to  the  whole  home 
industry,  and  especially  to  the  rolling  mills,  as  it  would 
entail  the  removal  of  the  duties  on  iron  bars  and  plates. 
For  these  duties  acted  chiefly  as  prohibitive  duties,  a  fact 
disputed,  however,  by  the  "pure"  rolling  mills. 

Finally,  in  the  opinion  of  the  Steel  Works'  Union,  the 
import  certificates  (for  the  export  of  articles  worked  up 
from  imported  pig  iron  or  half-manufactures) ,  demanded 
by  the  "pure"  works,  were  too  rigid  in  character  and 
could  not  be  adjusted  to  varying  market  conditions.  This 
pliability,  however,  was  essential  to  their  successful  appli- 
cation. If  the  demand  of  their  substitution  for  the  export 
payments  made  by  the  syndicate  were  to  be  granted,  they 


178 


The     German     Great    Banks 

might  easily  assume  the  character  of  true  export  boun- 
ties, especially  at  times  when  home  and  foreign  prices 
were  equally  high. 

As  a  sequence  to  this  at  times  quite  acrimonious  contro- 
versy, the  Steel  Works'  Union  decided  upon  the  reduction 
of  the  domestic  price  of  half -finished  material  by  5  marks 
per  ton  (this  came  into  force  on  the  ist  of  July,  1908). 
But  this  did  not  help  the  "pure"  works,  since  this  reduc- 
tion of  the  price  for  half-finished  material  had  been  antici- 
pated, and  accordingly  the  selling  price  of  sheet  and  bar 
iron  had  fallen  10  to  15  marks  per  ton;  that  is,  below  the 
cost  to  the  "  pure  "  rolling  mills.  Since  November  27,  1908, 
the  prices  on  fashioned  bar  iron  (Formeisen)  have  likewise 
been  reduced  for  the  first  half  of  1909  by  5  to  10  marks 
by  a  resolution  of  the  Steel  Works'  Union. 

As  no  important  improvement  has  taken  place  in  the 
condition  of  the  "pure"  rolling  mills,  a  condition  which 
resembles  in  a  striking  manner  the  present  condition  of 
the  private  banking  business  with  relation  to  the  great 
banks,  it  will  be  necessary  to  consider  the  demands  of 
these  works.  It  may  be  noted  in  this  connection  that 
some  of  the  great  banks  are  found  in  their  camp,  at  least 
with  part  of  their  interests,  though  the  large  majority  of 
the  great  banks  and  by  far  the  greater  part  of  their  inter- 
ests are  doubtless  identified  with  the  Steel  Works'  Union. 

The  carrying  out  of  the  plan  to  create  bar  iron  and 
sheet  iron  syndicates  (which  it  would  appear  has  been  re- 
cently supported  even  by  the  Government)  would  seem 
to  be  the  most  radical,  and  perhaps  the  only  way  of  im- 
proving the  doubtless  precarious  condition  of  the  "pure" 
rolling  mills.  Such  a  plan  should  certainly  be  supported 


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National    Monetary     Commission 

by  all  means  in  the  interests  of  German  trade  and 
industry. 

We  must  not  forget,  however,  that  the  scheme  to  form  a 
general  sheet-iron  syndicate  was  wrecked  not  only  by  the 
opposition  of  three  South  German  members  of  the  Steel 
Works'  Union  (de  Wendel,  Maxhutte,  and  Dillingen),  but 
also  by  the  opposition  of  a  great  number  of  Siegerland 
works.  The  formation  of  the  wrought  iron  syndicate  on 
the  other  hand  seems  to  have  come  to  grief  owing  to  the 
opposition  of  various  works,  as  well  as  to  the  demands  of 
wholesalers  who  insisted  upon  being  guaranteed  a  mini- 
mum profit  for  handling  the  products. 

Another  plan  would  be  the  extension  of  the  number  of 
"pure"  rolling  mills  by  the  erection  of  Martin  works, 
which  would  make  them  independent  of  the  supply  of 
half -finished  material  from  the  Steel  Works'  Union.  .It 
was  on  these  grounds  that  the  plan  was  strongly  advo- 
cated in  a  memorial  of  the  ' '  Association  of  crude  iron  and 
half -finished  material  consumers,"  which  in  the  main  sided 
with  the  "pure"  rolling  mills  against  the  contentions  of 
the  Steel  Works'  Union. 

The  construction  and  successful  working  of  new  Martin 
works  presumes,  however,  the  removal  of  the  import  duties 
(as  desired  by  the  "pure"  rolling  mills)  on  pig  iron,  half- 
finished  products,  and  scrap  iron.  It  is,  however,  very 
doubtful  if  the  removal  of  duties  would  be  in  the  interest 
of  national  industry,  and  even  more  so  whether  the 
change  would  prove  of  permanent  benefit  to  the  rolling 
mills  themselves. 

In  the  first  place  I  am  not  convinced  that  these  import 
duties  have  been  used  in  a  selfish  and  wrongful  manner 


180 


The     German     Great    Banks 

by  the  Steel  Works'  Union  in  order  to  crush  the  "pure" 
rolling  mills.  On  the  contrary,  it  seems  to  me  that  even 
the  strongest  combination  is  hardly  able  in  the  long  run 
to  realize  through  its  domestic  selling  prices  the  full  pro- 
tective duties  on  the  half -finished  material,  because  in 
the  main  we  export  half-finished  material.  Certainly  in 
periods  of  booms  the  influence  of  prices  in  the  world 
markets  will  largely  equalise  the  influence  of  duties  and 
freights  on  inland  prices.  Even  the  average  inland  price 
for  grain  (the  imports  of  which  largely  exceed  the  exports) 
has  not  always  equaled  the  average  foreign  prices  plus 
freight  and  duty. 

In  the  foreign  markets  the  determining  price  factor  as 
a  rule  and  in  the  long  run  is  mainly  the  condition  of  the 
international  market  as  affected  by  supply  and  demand. 
Prices  in  the  world  market  are  quite  independent  of 
domestic  prices  and  are  the  result  of  altogether  different 
factors.  There  is  no  reason,  therefore,  why  they  should 
correspond  to  the  domestic  prices  plus  protective  duties 
and  the  freight  difference. 

I  also  share  the  opinion  of  the  Steel  Works'  Union  that 
once  a  breach  has  been  made  in  the  customs  wall  for  iron 
such  as  the  pure  works  desire  by  the  removal  of  the 
duties  from  half -products  and  by  the  introduction  of  im- 
port certificates,  the  abolition  of  the  remaining  iron  duties 
would  necessarily  follow.  For  it  will  be  difficult  in  the 
long  run  to  maintain  free  trade  for  the  export  business 
and  to  continue  to  make  use  of  protective  tariffs  for  other 
branches  of  the  iron  industry,  such  as  pig  iron,  bar  iron, 
sheet  iron,  and  wire. 

It  seems  to  me  that  much  as  the  removal  of  protective 
duties  may  be  desirable  on  principle  the  removal  of  the 

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National    Monetary     Commission 

duties  on  pig  iron  and  half -products  which,  like  the  cartels, 
are  the  means  not  only  of  raising  but  maintaining  the 
prices  of  domestic  products,  would  be  premature,  for  the 
reasons  stated  in  the  memorial  of  the  Steel  Works'  Union 
and  in  view  of  present  conditions.  Nor  can  we  be  quite 
sure  that  at  no  distant  date  the  raw  material  (Einsatz- 
material)  of  the  Steel  Works'  Union  now  entering  duty 
free  (at  least  the  ores)  may  not  become  subject  to  foreign 
export  duties. 

Added  to  this  is  the  fact  that  as  long  as  the  agrarian 
protective  duties  continue,  the  one-sided  removal  of  the 
industrial  protective  duties  would  mean  an  unfair  burden- 
ing of  the  industrial  population,  which  would  moreover 
be  left  unprotected  against  foreign  competition. 

To  return  to  the  other  purposes  of  the  Steel  Works' 
Union  (Stahlwerksverband): 

The  union  endeavors,  by  a  series  of  measures  intended 
to  insure  regular  work  for  syndicate  undertakings,  to 
reduce  the  cost  of  production,  a  matter  which  hitherto  has 
not  been  influenced  in  the  slightest  degree  by  the  syndi- 
cates. Finally,  it  has  promoted  the  formation  of  dealers' 
associations,  limited  to  certain  districts,  especially  the 
Rhenish- Westphalian,  the  Middle-German,  and  the  South 
German  girder  dealers'  associations,  the  existence  of  which 
was  at  one  time  endangered  through  dissension,  but  which 
is  now  assured  for  another  five  years,  dating  from  the 
summer  of  1907  to  June  30,  1912. 

The  Steel  Works'  Union,  by  reason  of  its  organisation 
and  of  its  freer  attitude  toward  the  export  trade,  is  in  a 
position  to  pave  the  way  for  international  agreements 
with  the  chief  exporting  countries.  In  fact  it  has  suc- 


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The     German     Great    Banks 

ceeded  in  bringing  about  such  agreements,  although  only 
for  a  short  period  each.  On  November  28,  1904  (retro- 
active from  October  n,  1904),  an  agreement  concerning 
the  export  of  rails  was  arrived  at  between  England,  Ger- 
many, France,  and  Belgium,  to  begin  with,  for  a  period  of 
three  years  (till  March  31,  1908),  and  on  November  24, 
1904,  an  agreement  was  concluded  between  Germany, 
France,  and  Belgium  with  reference  to  the  export  of 
girders  for  the  period  of  two  and  one-half  years  (until  June 
30,  1907). m 

Both  agreements  have  been  extended  indefinitely  and 
barring  unforeseen  incidents  are  likely  to  remain  in  force 
until  June  30,  1912,  the  date  of  the  expiration  of  the  Steel 
Cartel  agreement. 

The  United  States  Steel  Corporation  (acting  also  for 
the  Lacka  wanna  and  Pennsylvania  Companies),  founded 
February  23,  1901,  with  a  capital  of  $1,400,000,000,  joined 
the  International  Rail  Cartel  later  on.  The  Steel  Corpora- 
tion does  not  comprise,  as  is  frequently  stated,  the  whole 
steel  production  of  the  United  States,  but  so  far  "only" 
two-thirds  of  the  American  steel  output,  and  controls 
about  1,500  miles  of  railway,  or  rather  less  than  i  per  cent 
of  the  whole  railway  mileage  of  the  United  States.175 

We  shall  close  the  review  of  the  period  with  this  men- 
tion of  the  international  agreements,  which  were  initiated 
in  Germany  and  in  which  up  to  the  present  German  indus- 
try has  been  able  to  secure  an  eminently  satisfactory  posi- 
tion in  accordance  with  its  industrial  achievements.  This 
period  is  characterized  not  only  by  expansion  and  concen- 
tration in  the  fields  of  trade,  industry,  and  particularly 
banking,  but  also  by  the  greatest  revolutions  in  the  eco- 
nomic field;  it  marks  the  era  of  international  trade,  the 


National    Monetary     Commission 

precursor,  and  in  part  also  the  cause  of  the  new  era  of 
"world"  and  colonial  politics.  It  was  a  period  of  vast 
inventions  and  discoveries,  which  created  perfectly  new 
industries,  and  fundamentally  transformed  existing  ones, 
and  which  imposed  on  the  industries  (often  protected 
by  high  customs  duties)  great  tasks  in  the  international 
market,  which  were  achieved  to  a  considerable  extent. 
The  revolutionary  character  of  this  epoch,  however,  ex- 
pressed itself  in  two  tremendous  crises — in  the  crisis  of 
1873  and  that  of  1900. 

This  period  marks  the  complete  transformation  of  the 
character  of  German  industrial  organization,  begun  in  the 
last  decade  of  the  preceding  epoch.  The  new  order,  de- 
spite the  partly  sound,  partly  inadequate,  arguments 
urged  against  it,  possesses  no  doubt  the  great  merit  of 
having  provided — principally  by  increased  export  trade — 
food  and  occupation  for  the  enormously  increased  popu- 
lation, which,  it  was  stated  as  early  as  the  middle  of  last 
century,  agriculture  was  no  longer  able  to  sustain.  More- 
over, the  view  seems  fairly  justified,  at  least  to  a  certain 
extent,  that  the  recent  growth  of  imports,  which,  as  was 
pointed  out  above  (pp.  112  and  121),  in  certain  branches 
largely  exceeded  the  simultaneous  growth  of  exports,  is  a 
fair  indication  that  the  large  increase  of  production  during 
late  years  is  due  primarily  to  increased  home  demand. 

The  following  question,  however,  should  not  be  sup- 
pressed in  this  recapitulation  of  the  past  and  forecast  of 
the  future:  What  will  happen  if  imports  into  Germany 
continue  to  increase  greatly,  and  exports  fall  off  consider- 
ably? This  danger  must  be  borne  in  mind  as  a  serious 
eventuality,  at  least  for  some  industries,  a  danger  which 
may  result  from  high  protective  duties  likely  to  be 


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The     German     Great    Banks 

introduced  abroad,  especially  in  America  and  the  British 
Empire,  as  well  as  from  existing  German  commercial 
treaties. 

As  far  as  the  latest  commercial  treaties  are  concerned 
they  offer  one  gratifying  advantage  benefiting  the  whole 
community,  namely,  the  assistance  and  support  against 
foreign  countries  demanded  by  agriculturists  and  abso- 
lutely necessary  in  many  directions  and  parts  of  the 
country.  As  a  result  of  this  support  agriculture  was  able 
to  recover  its  former  vigor  and  prosperity  by  internal 
means,  especially  by  a  more  vigorous  and  concentrated 
development  of  agricultural  credit  and  cooperation.  This 
development  is  highly  desirable  from  the  point  of  view 
of  national  interests,  as  it  tends  to  reduce  the  necessity 
of  foreign  grain  imports  to  the  smallest  extent  possible. 

But  inasmuch  as  only  such  governmental  measures  can 
be  of  general  or  permanent  benefit  in  which  consideration 
for  the  interests  of  one  class  of  the  community  goes  hand 
in  hand  with  due  regard  for  the  interests  of  the  com- 
munity as  a  whole,  it  is  our  earnest  hope  that  the  protec- 
tion of  our  home  agriculture  may  not  have  been  accorded 
at  the  expense  of  commercial  and  industrial  development, 
or  even  of  important  branches  of  industry  or  industrial 
export  branches. 

Much  depends  on  the  vigor  of  commerce,  especially 
the  vigor  of  industry,  which  must  continue  to  advance 
and  must  not  rest  for  a  moment.  Its  further  progress 
will  depend,  first  and  foremost,  on  the  powerful  and 
judicious  support  of  those  institutions  but  for  whose 
constant  and  energetic  cooperation  the  great  economic 
achievements  of  the  period  could  not  have  been  attained, 
to  wit,  the  German  banks.176 


185 


CHAPTER  SE. — The  German  Great  Banks  during  the  second 
period  (1870  until  the  present) . 

SECTION  I. — (i). 

INTRODUCTION. 

The  activity  of  the  banks  in  the  economic  life  of  society 
has  often  been  likened  to  that  of  the  heart  in  the  human 
body. 

This  comparison  is  quite  proper.  For  just  as  it  is  the 
function  of  the  heart  to  regulate  by  means  of  certain 
organs  the  circulation  of  the  blood,  which  through  countless 
arteries  and  veins  flows  through  the  human  body  and 
returns  to  the  heart,  so,  as  was  shown  above,  it  is  the 
function  of  the  banks  to  regulate  by  certain  economic 
measures  the  circulation  of  capital,  which  flows  from  them 
and  returns  to  them,  and  which  may  properly  be  regarded 
as  the  life  blood  of  the  modern  economic  organism. 

The  multiplicity  and  importance  of  the  functions  of 
the  human  heart  can  best  be  seen  from  a  study  of  the 
functions  of  each  part  of  the  human  body  in  the  entire 
organism.  In  a  like  manner  some  idea  of  the  tasks  ful- 
filled by  the  German  banks  during  the  more  recent  period 
can  be  had  from  a  discussion  of  those  leading  factors  in  the 
general  economic  development  of  the  period,  which  were 
furthered  by  the  banks,  particularly  through  their  activity 
in  the  credit  field,  by  floating  enterprises  and  issuing 
securities. 

Inasmuch  as  important  phases  of  this  activity  have  been 
described  in  the  introduction  and  in  the  chapters  devoted 


The     German     Great    Banks 

to  the  early  period  of  German  banking,  and  as  this  activity 
has  proceeded  on  the  whole  along  the  same  lines,  though 
on  a  larger  scale,  during  the  more  recent  period,  it  will  be 
sufficient  to  point  out  merely  the  special  tasks  undertaken 
by  the  banks  during  this  period. 

For  only  in  this  manner  will  it  be  possible  to  achieve  our 
main  purpose  of  presenting  a  complete  picture  of  the 
influence  and  activity  of  the  banks  in  the  general  economic 
development  during  the  two  periods. 

But  in  contrast  with  former  editions  of  this  book  I  shall 
endeavor  in  each  of  the  subsequent  chapters  to  describe, 
at  least  in  outline,  the  share  of  each  of  the  large  banks  in 
the  common  task.  It  will  then  be  seen  that,  notwith- 
standing the  similarity  of  the  purposes  and  of  the  general 
development,  each  large  bank  has  shown  a  peculiar  char- 
acter and  development,  has  pursued  a  peculiar  business 
policy  (cf .  Sect.  6,  below)  and  that  this  policy,  even  within 
the  same  bank,  has  shown  numerous  and  at  times  radical 
changes  depending  on  the  change  of  management,  times, 
and  purposes. 

Before  proceeding  with  our  inquiry  let  us  recall  what 
amounts  of  capital  were  at  the  disposal  of  the  German 
credit  banks  for  the  achievement  of  their  tasks  at  the 
beginning  of  the  present  period.  As  stated  before,  of  the 
total  amount  of  about  2,405,000,000  marks  which  repre- 
sented the  share  capital  of  the  stock  companies  founded 
in  Prussia  during  the  nineteen  years' period  of  1851-1870, 
the  share  of  banking  capital  was  94,650,000  marks,  that 
is  to  say,  less  than  100,000,000  marks,  or  about  5,000,000 
for  each  year  (cf.  p.  48,  supra). 


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National    Monetary     Commission 

In  1870  the  capital  of  the  large  banks  founded  during 
the  earlier  period  showed  the  following  amounts: 

Bank  fur  Handel  and  Industry,  25,046,000  florins  (42,936,000  marks). 

Disconto-Gesellschaft,  10,000,000  thalers  (30,000,000  marks).177 

Berliner  Handelsgesellschaft,  5,625,000  thalers  (16,875,000  marks). 

A.  Schaaffhausen'scherBankverein,  5, 200,000  thalers,  (15,600,000  marks). 

Mitteldeutsche  Kreditbank,178  5,000,000  thalers  (15,000,000  marks). 

In  1870  a  Konzession  was  granted  to  the  Deutsche  Bank 179  with  a  capital 
of  5,000,000  thalers  (15,000,000  marks). 

During  the  same  year  the  Commerz-  und  Disconto-  Bank  at  Hamburg  was 
founded  with  a  nominal  capital  of  30,000,000  marks,  of  which  15,000,000 
marks  were  paid  in. 

In  1872  the  Dresdner  Bank  at  Dresden  was  founded  with  a  nominal 
capital  of  8,000,000  thalers,  equal  to  24,000,000  marks,  of  which  40  per 
cent  were  paid  in,  i.  e.,  3,200,000  thalers  (9,600,000  marks). 

In  1 88 1  under  totally  changed  conditions  the  Nationalbank  fur  Deutsch- 
land  was  founded  with  a  nominal  capital  of  45,000,000  marks,  of  which 
20,000,000  marks  were  paid  in. 

Further  substantial  increases  of  both  the  number 
and  capital  of  the  German  credit  banks  followed  in  rapid 
succession  during  this  period.  As  early  as  1872  the  com- 
bined capital  of  the  then  existing  German  credit  banks 
(enumerated  in  Appendix  III,  at  the  end  of  the  volume) 
exceeded  1,000,000,000  marks  (1,122,113,000  marks).  Of 
the  total  number,  however,  not  less  than  73  banks,  with  a 
capital  of  432,500,000  marks,  were  compelled  to  wind  up 
their  affairs  during  the  six  years  of  business  depression 
which  followed  the  crisis  of  i873.180 

Here  again  I  shall  depart  from  the  method  followed 
in  former  editions.  Following  the  usual  classification  of 
banking  business  into  credit  and  debit  transactions,  I 
shall,  as  stated  in  the  preface,  take  up  the  discussion  of 
the  principal  credit  and  debit  transactions  (Aktiv-  und 


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The     German     Great    Banks 

Passi-v-  Geschafte)  of  the  German  banks  with  particular 
reference  to  the  great  banks. 

At  the  outset  the  following  general  considerations 
should  be  emphasized.  It  is  regarded  as  a  fundamental 
rule  both  for  banks  of  issue  and  for  credit  banks,  which 
are  not  permitted  to  issue  notes,  that  the  charactei  of 
their  debit  transactions  shall  determine  the  character  of 
their  credit  transactions,181  or,  in  other  words,  that  a 
credit  bank  must  not  grant  credit  different  in  character 
from  that  which  it  receives.  This  proposition  must  in- 
deed be  recognized  also  as  the  fundamental  principle  of 
credit  banks,  but  it  is  to  be  understood  in  the  sense 
that  a  credit  bank,  in  proportion  as  it  has  procured 
moneys  repayable  on  demand  or  within  short  or  longer 
terms,  or  has  contracted  credit  obligations  which  become 
due  on  demand  or  within  short  or  longer  terms,  must 
invest  the  funds  at  its  disposal  in  such  a  manner  that  it 
shall  be  in  a  position  to  meet  its  obligations  at  all  times 
when  they  become  due. 

At  the  same  time,  however,  a  bank  may  assume  that, 
at  least  in  normal  times,  not  all  the  moneys  due  will  be 
claimed  simultaneously,  just  as  a  fire  insurance  company 
is  justified  in  assuming  that  not  all  the  insured  houses 
will  be  destroyed  by  fire  at  the  same  time. 

No  general  and  fixed  rules  can  be  laid  down  as  to  the 
percentage  of  the  claims  likely  to  be  presented  for  pay- 
ment. Such  a  percentage  can  be  estimated  only  on  the 
basis  of  the  experience  gathered  during  a  long  time  by 
the  individual  bank,  with  due  regard  to  the  experience  of 
other  banks  and  to  its  own  peculiar  character;  in  other 


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National    Monetary     Commission 

words,  by  using  the  care  and  precaution  customary  in 
business,  and  more  especially  in  the  banking  field. 

The  general  practice  of  the  German  large  banks  is 
even  more  cautious,182  since  they  dispose  of  their  funds  in 
such  a  manner  as  to  be  prepared  at  any  moment  to  repay 
one- third  of  all  outsiders'  funds  (fremde  Gelder),  irre- 
spective of  whether  they  are  payable  on  demand  or  after 
longer  or  shorter  terms,  by  the  aid  of  resources  which 
may  be  regarded  as  being  of  first-class  liquidity,  i.  e., 
cash,  including  bank  notes,  sight  drafts,  and  checks, 
contango  (Reports),  bills,  also  the  so-called  "Nostro" 
credits,  i.  e.,  credits  held  with  first-class  domestic  and 
foreign  banks  and  banking  firms. 

"Outsiders'  funds"  (fremde  Gelder)  include  the  deposits 
(Depositen),  the  credit  balances  on  current  account,  and 
other  balances  not  on  current  account,  resulting  from 
loan  operations  and  other  issue  business,  or  from  the 
coupon  service,  or  from  interest-bearing  funds  held  until 
settlement  day  to  the  credit  of  domestic  and  foreign 
states,  provinces,  districts,  communes,  commercial  and 
industrial  concerns,  of  land  banks,  note  banks,  and  other 
banks,  insurance  companies,  administrations,  corporations, 
institutions,  foundations,  and  private  capitalists. 

The  liquid  assets  stated  above  include  the  so-called 
reports,  which  as  a  rule,  or  at  least  primarily,  comprise  only 
such  as  can  be  realized  in  the  international  market,  as  for 
instance  those  concluded  in  London  and  which  become 
payable  on  an  average  within  a  fortnight  (instead  of  the 
usual  term  of  four  weeks).  Similarly  bills  mentioned 
among  this  class  of  assets  must  be  such  as  can  be  used 
for  international  transactions.  They  may  be  in  terms 


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The     German     Great    Banks 

of  German  currency,  since  there  is  normally  a  large  de- 
mand abroad  for  German  prime  discounts.  Only  in  the 
second  place  do  the  banks  resort  for  this  purpose  to 
short-term  or  shortly-due  bills  which  may  be  rediscounted 
at  the  Reichsbank.183 

Such  a  constant  readiness  for  the  repayment  of  a  third 
of  all  "outsiders'  funds"  (not  only  of  deposits),  must  be 
regarded  as  more  than  sufficient,  since  never  yet  in  the 
history  of  the  German  great  banks  has  there  been  a  case 
when  payment  of  one-third  of  all  the  liabilities  has  been 
demanded  suddenly  without  notice.  Were  the  Reichs- 
bank to  reckon  with  the  possibility  of  a  sudden  presenta- 
tion of  one- third  even  of  its  notes  only,  it  could  not 
maintain  its  present  mode  of  calculating  its  liquid  assets. 
As  a  matter  of  fact,  there  is  no  legal  provision  whatever 
for  cash  security,  so  far  as  the  giro-claims  of  the  Reichs- 
bank are  concerned. 

SECTION  2.— THE   CURRENT    (REGULAR)  BANKING 
BUSINESS. 

i.  THE    DEBIT   OPERATIONS    OF    THE    GERMAN   CREDIT 
BANKS    (TAKING   OF   CREDIT). 

(A)  THE  DEPOSIT  BUSINESS. 

(i)  General  observations. 

As  stated  before  (see  pp.  73  and  74),  the  German  banks, 
during  the  first  period,  proceeded  mainly  on  the  principle 
of  carrying  on  their  business,  as  far  as  possible,  with  their 
own  means.  In  the  interest  of  their  own  security  they 
did  not  deem  it  advisable  "  to  bring  about  an  increase  in 
the  amounts  of  deposits  by  granting  more  liberal  terms." 
JDheir  customary  practice,  therefore,  was  to  accept  deposits 

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National    Monetary     Commission 

repayable  only  after  three,  six,  or  twelve  months'  notice, 
on  which,  moreover,  only  a  small  interest  was  paid. 

The  systematic  fostering  of  the  deposit  business  by 
the  German  banks,  which  in  England  is  regarded  as  an 
essential  element  of  banking,184  is  due  to  the  initiative  of 
the  Deutsche  Bank,  which  almost  immediately  after  its 
foundation  in  1870  began  to  devote  itself  energetically  to 
this  class  of  business. 

Already  during  the  Franco-Prussian  war,  toward  the  end 
of  1870,  the  Deutsche  Bank  opened  special  deposit  offices, 
at  first  in  Berlin,  then  in  a  number  of  suburbs,  also  in 
Wiesbaden,  Hamburg,  Leipzig,  and  Dresden.  In  this 
manner  manufacturers  and  capitalists  were  enabled  to 
invest  productively  even  the  smallest  available  amounts 
(of  not  less  than  10  thalers),  while  the  Bank  was  in  a 
position  to  use  these  deposits — which  became  its  prop- 
erty with  the  restrictions  mentioned  above 185 — for  certain 
business  purposes,  having  been  the  first  to  reach  the  con- 
viction that,  in  view  of  the  large  demands  and  tasks  pre- 
sented to  the  banks  their  credit  business  could  no  longer 
be  transacted  with  their  own  means.  Since,  however,  even 
the  use  of  only  a  portion  of  the  deposits  for  its  own  busi- 
ness, even  with  the  observance  of  the  required  restric- 
tions, can  be  permitted  only  in  case  the  remaining  por- 
tion is  adequately  secured  by  most  liquid  assets  (stets 
greifbare  Mittel),  the  Bank  at  the  same  time  took  exem- 
plary precautions  to  provide  for  this  form  of  securities 
and  adopted  a  special  organization  of  the  deposit  business, 
so  arranged  that  the  special  division  created  for  the  pur- 
pose might,  when  necessary,  be  separated  at  any  time  and 
made  independent. 


192 


The     German     Great    Banks 

The  opening  of  these  deposit  branches186  on  the  one 
hand  made  it  easier  for  manufacturers  and  capitalists 
to  obtain  bank  credit;  on  the  other  hand  it  brought  the 
Bank  in  contact  with  a  constantly  growing  number  of 
customers,  whose  financial  standing  was  known  and  who 
formed  a  regular  and  steadily  increasing  circle  of  sub- 
scribers to  the  stocks  and  bonds  issued  by  the  Bank. 

Conditions  in  Germany,  unlike  those  in  England,  pre- 
sented a  number  of  serious  obstacles  to  a  vigorous  growth 
of  the  deposit  business. 

In  the  first  place,  the  general  custom  in  Germany  among 
manufacturing  and  other  circles  is  to  keep  on  hand  much 
larger  amounts  in  cash  than  actually  necessary.  In  the 
case  of  the  smaller  traders  and  manufacturers  this  is  caused 
partly  by  the  fact  that  often  they  have  no  regular  bank 
connections.  For  this  reason  they  keep  idle  at  home  the 
money  needed  to  meet  maturing  obligations,  and  even 
much  more,  from  sheer  timidity,  merely  using  so  much  of 
it  as  is  required  for  their  current  business.  The  same  and 
similar  remarks  apply  to  many  capitalists,  who,  following 
old-time  tradition,  are  often  given  to  hoarding  their  cash 
resources  in  the  most  primitive  fashion. 

To  the  extent,  however,  that  the  patent  advantages  of 
interest-bearing  investment  helped  to  overcome  this  tradi- 
tional inertia,  it  was  the  deeply  rooted  custom  among  large 
classes  of  the  German  population  to  turn  over  small  sav- 
ings to  the  savings  banks.  The  latter,  in  many  cases, 
were  older  than  the  credit  banks,  and  owed  their  origin 
to,  and  were  identified  with,  local  conditions.  They  were 
convenient  for  the  deposit  and  withdrawal  of  money,  even 


90311"— ii 14  193 


National    Monetary     Commission 

in  the  smaller  towns,  besides  being  either  public  institu- 
tions or,  at  least,  under  state  control. 

Finally,  at  the  beginning  of  the  seventies,  the  amount 
of  available  national  wealth  was  relatively  small.  Since 
the  deposit  business  presupposes  large  amounts  of  surplus 
funds,  the  establishment  of  special  deposit  banks  would 
have  proved  unprofitable  and  was  therefore  out  of  the 
question,  at  least  for  a  good  while. 

Under  these  circumstances  all  that  the  German  credit 
banks  could  do  at  first  was  to  use  their  utmost  care  and 
efforts  to  prepare  the  ground  for  a  gradually  developing 
deposit  business.  It  was  utterly  out  of  the  question,  in 
view  of  the  then  existing  conditions  and  habits  of  the 
people,  that  the  latter  would  take  their  savings  to  the 
credit  banks  in  the  same  manner  as  to  the  savings  banks. 
In  fact,  the  deposit  offices  had  to  create  their  own  deposi- 
tors. Their  mode  of  procedure  in  this  matter,  allowing 
for  certain  differences  of  conditions,  was  not  much  unlike 
that  of  the  English  deposit  banks  during  the  early  period. 
As  pointed  out  before  the  Bank  Inquiry  Commission,  the 
deposit  offices  extended  credit  to  manufacturers  and  trad- 
ers, thus  enabling  them  to  pay  their  creditors  through  their 
intervention.  The  creditors  quite  often  were  induced 
not  to  draw  the  money  due  or  to  re-deposit  it,  receiving 
for  it  a  higher  than  the  customary  rate  of  interest. 

After  the  connection  had  been  made  in  this  or  similar 
manner,  it  followed,  as  a  matter  of  course,  that  the  persons 
to  whom  credit  was  extended,  as  well  as  those  who  shared 
in  it,  gradually  came  to  deposit  at  the  branch  their  cash 
funds  and  reserves  and  to  transact  there  all  their  banking 
business. 


194 


The     German     Great    Banks 

The  new  customer  began  to  draw  checks  upon  the 
deposit  office,  to  discount  there  his  commercial  bills,  to 
have  the  office  attend  to  most  of  his  payments,  and  lessen 
the  risk  in  his  import  and  export  business.  The  office 
granted  him  acceptance  credit,  undertook  the  investment 
of  his  funds  and  the  management  of  his  property  in  secu- 
rities, gave  him  information  and  advice  and  procured  for 
him  advantages  of  all  sorts.  In  this  manner  the  deposit 
offices,  which  from  the  mere  profits  of  the  deposit  busi- 
ness would  never  have  been  able  even  to  defray  their 
operating  expenses,187  and  which  therefore  were  equally 
interested  in  enlarging  the  scope  of  their  business  opera- 
tions, gradually  assumed  the  character  of  so-called 
Wechselstuben  (exchange  offices) ,  engaging  in  all  classes 
banking  business,  like  the  central  parent  bank,  or  its  ordi- 
nary branches,  except  dealing  in  securities  on  own  account 
and  undertaking  syndicate  business  (Konsortialgeschdfte) . 
This  was  carried  so  far  that  the  new  competition  caused 
loud  complaints  among  the  private  bankers  affected 
thereby.  It  is  thus  seen  that  the  origin  of  commercial 
deposits  at  the  German  banks  is  altogether  different  from 
that  of  the  savings  deposits  at  the  savings  banks.  Sta- 
tistically this  may  be  proved  by  the  observation  that  the 
amounts  of  deposits  increase  or  decrease  in  accordance 
with  the  general  increase  or  decrease  of  credit  operations. 
Equally  different  are  the  purposes  for  which  deposits  are 
made  at  the  two  classes  of  banks. 

l^he  client  of  a  savings  bank,  belonging  almost  exclu- 
sively to  the  middle  and  lower  classes,  has  in  mind  an 
institution  which  shall  permanently  and  securely  keep  and 
administer  his  savings  deposits,  and  pay  him  the  highest 


195 


,d 

of  L^ 
H- \ 


National     Monetary     Commission 
possible  rate  of  interest.    The  client  of  a  commercial  bank, 


' 


>elonging  mainly  to  the  middle  and  higher  classes  and 
>articularly  to  the  commercial  and  industrial  groups,  as  a 
•ule  has  in  mind  the  temporary  deposit  and  utilization  of. 
lis  surplus  funds,  being  therefore  in  most  cases  satisfied 
vith  a  low  rate  of  interest  until  such  time  as  he  can  invest 
hem  permanently  in  securities,  mortgages,  or  industrial 
nterprises ;  moreover,  he  is  particularly  interested  in  turn- 
n&pyer  the  administration  and  use  of  these  funds  to  the 
>ank  which  attends  to  his  other  banking  business. 


With  few  exceptions  the  former  has  but  one  character.188 
He  is  a  depositor  of  savings  and  nothing  else.  The  latter 
has  a  Protean  character;  one  day,  in  virtue  of  his  deposit, 
he  may  be  a  creditor,  some  other  day,  in  virtue  of  his  cur- 
rent account — or  other  connections  with  the  bank,  he  may 
be  a  debtor.  He  may  become  creditor  as  well  as  debtor, 
for  a  thousand  and  one  reasons.  Thus,  unlike  the  savings 
bank  depositor,  he  is  not  presumed  to  exclude  the  right  of 
hypothecation  or  detention  of  the  deposit  on  the  part  of 
the  bank. 

For  this  reason  it  is  very  difficult  to  give  a  definition 
of  the  German  term  "bankmdssige  Depositen",  since  in 
Germany  the  term  comprises  not  only  what  are  known  in 
England  as  current  accounts,  but  likewise  what  are  known 
there  as  "  deposit  accounts."  As  these  various  designa- 
tions are  far  from  uniform  and  on  the  other  hand  are 
coterminous,  it  is  almost  impossible  to  obtain,  for  the 
various  German  banks,  uniform  and  comparable  data  of 
"  deposits  "  on  a  scientifically  unobjectionable  basis.  For 
these  and  other  reasons  some  banks  have  heretofore  either 
failed  altogether  to  give  any  separate  account  of  their 


196 


The     German     Great    Banks 

« — ,, ..     .,..,„• ..-.-         ...i........ ,    .      , i .  .     i .      i - -.,-....,- .._ .— . •. 

deposits,  or  have  shown  the  latter  combined  with  the  so- 
called  "creditors"  accounts.  This  is  true  of  the  Darm- 
stddter  Bank  (which,  however,  has  of  late  been  giving  sep- 
arate data  for  deposits),  of  the  Berliner  Handelsgesell- 
schaft,  the  Commerz-  und  Disconto-Bank,  the  Mitteldeutsche 
Kreditbank,  and  the  Nationalbank  fur  Deutschland.  Other 
institutions,  such  as  the  Deutsche  Bank  and  the  Dresdner 
Bank  comprise  among  deposits  on  the  one  hand  all  "  cred- 
itors" of  their  deposit  offices  and  exchange  offices — a 
proceeding  which  can  be  explained  only  in  view  of  the 
peculiar  development  of  the  German  deposit  business  just 
described — and  on  the  other  all  those  "creditors"  who 
may  have  intrusted  moneys  to  other  offices  of  these 
banks  upon  receipt  of  so-called  "Depositenquittungsbucher" 
(deposit  receipt  books)  or  else  without  such  books  but 
expressly  designating  them  as  "deposits."189 

The  Disconto-Gesellschaft,  while  stating  separately  the 
"  deposits  "  in  its  regular  reports,  as  well  as  in  its  jubilee 
report  of  1901  (p.  260),  seems,  however,  to  include  under 
that  head  the  current  accounts  of  larger  domestic  and 
foreign  firms  and  corporations,  since  the  amounts  of  these 
deposits  show  oscillations  which  can  not  be  explained  ex- 
clusively by  contemporary  business  conditions  or  the  state 
of  the  money  market.190  On  the  other  hand,  its  reports 
up  to  the  year  1908  invariably  grouped  under  the  head  of 
"creditors"  instead  of  "debtors,"  the  balances  daily  due 
(die  tdglich  fdlligen  Guthaberi) ,  held  at  its  deposit  offices. 

It  is  plain  both  from  the  account  of  the  development  of 
the  German  deposit  business  and  from  the  purposes  for 
which  these  deposits  are  made  and  received,  that,  as  was 
pointed  out  also  at  the  third  general  convention  of  Ger- 
man bankers  at  Hamburg191  (Sept.  5  and  6,  1907),  only 


197 


National    Monetary     Commission 

an  exceedingly  small  portion  of  the  deposits  of  the 
German  credit  banks — in  my  opinion  less  than  one- 
third — is  made  up  of  what  may  properly  be  called  savings 
deposits.  By  far  the  larger  portion — not  less  than  two- 
thirds  if  not  three-fourths — of  these  deposits  represent 
"operating  reserves"  of  traders192  (cash  on  hand,  reserve, 
etc.)  or  of  funds  of  traders  or  capitalists  temporarily 
deposited  but  destined  for  investment  in  securities,  mort- 
gages, industrial  enterprises,  etc.  This  opinion  is  shared 
unanimously  by  other  students  of  the  question,  including 
the  experts  heard  in  1908  before  the  Bank  Inquiry 
Commission.193 

Betweeri  i^7QT  when  the  systematic  fostering  of  the 
deposit  business  on  the  part  of  the  German  banks  may 
be  said  to  have  commenced,  and  1891,  that  is  to  say, 
during  twenty-one  years  of  the  most  intensive  fostering 
of  this  branch  of  business,  those  banks  which  hold  by 
far  the  larger  part  of  the  total  deposits,  namely,  the  143 
German  credit  banks  having  a  capital  stock  of  at  least 
1,000,000  marks  each,  had  accumulated  total  deposits 
amounting  to  386,000,000  marks . 

Nine  years  later,  according  to  a  compilation  of  the  Deut- 
scher  Okonomist,  118  of  the  largest  German  credit  banks 
had  accumulated  997, 000,000  marks  of  deposits;  i.  e.,  after 
thirty  years  of  fostering  of  this  branch  of  business,  these 
banks  had  succeeded  in  attracting  not  quite  i  ,000,000,000 
marks  of  deposits. 

After  .another  nine  jyears,_on  December  31,  1908,  the 
|total  deposits  of  all  German  credit  banks  reached  about 
[2,750,000,000  marks,  of  which  about  2,250,000,000  were 
[the  share  of  the  1 43  German  credit  banks  having  a  capital 
of  at  least  i  ,000,000  marks  each. 


198 


The     German     Great    Banks 

The  large  increase  within  the  last  nine  years  is  due  not 
merely  to  the  growth  in  the  volume  of  credit  operations — 
the  prime  cause  of  growing  deposits — and  of  the  general 
prosperity,  but  above  all  to  the  large  increase  in  the  number 
of  the  deposit  offices  of  the  great  Berlin  and  provincial 
banks,  especially  notable  during  those  years.  It  is  also 
due  to  the  fact  that  owing  to  improvements  of  the  bank 
statements  and  the  more  thorough  work  of  the  private 
statisticians,  the  statistics  comprise  now  the  operations  of 
nearly  all  German  credit  banks,  413  in  number,  with 
all  their  branches,  silent  partnerships  (Kommanditeri) , 
agencies,  and  deposit  offices. 

In  view  of  this  circumstance  and  the  fact  that  this  total 
represents  the  result  of  nearly  forty  years  of  concentrated 
and  consistent  effort,  even  this  result  can  not  be  regarded, 
either  absolutely  or  relatively,  as  a  great  success.  Hence 
the  statement  194  made  as  early  as  1 904  that  there  was 
"an  unhealthy  growth  of  deposits,"  seems  entirely  un- 
founded. This  becomes  especially  apparent  when  the 
above  total  is  compared  with  the  total  volume  of  the  sav- 
ings deposits  held  by  the  German  public  and  private  sav- 
ings banks,  which,  on  December  31,  1906,  had  reached 
a  total  of  13,250,000,000  marks,  and  by  December  31, 
1908,  amounted  probably  to  between  14,000,000,000  and 
15,000,000,000  marks. 

To  this  should  be  added  the  savings  and  other  deposits 
(jremde  Gelder,  less  credit  balances  on  current  account) 
held  by  the  16,000  cooperative  credit  associations  (Kredit- 
genossenschafteri)  in  city  and  country,  which  on  December 
31,  1906,  amounted  to  about  2,000,000,000  marks,  also 
the  amounts  accumulated  in  the  note  banks,  people's 


199 


National    Monetary     Commission 

banks,  and,  since  January  i,  1909,  in  the  check  depart- 
ments of  the  post-offices 195  (which  latter  amount  is  likely 
to  continue  increasing  but  can  not  be  considered  in  this 
connection) . 

It  is  perfectly  improper  either  to  calculate  a  percentage 
of  growth  for  arbitrarily  chosen  periods  or  for  unequal 
numbers  of  banks,  or  by  comparing  percentages  to  make 
the  growth  of  deposits  in  the  German  credit  banks  appear 
considerably  larger  than  in  the  savings  banks  or  in  the 
English  joint-stock  banks. 

Thus,  for  instance,  the  total  deposits  of  92  credit 
banks  at  the  end  of  1892,  408,000,000  marks,  were  taken 
as  100,  and,  compared  with  the  total  deposits  of  118  credit 
banks  at  the  end  of  1907,  997,000,000  marks,  an  in- 
crease of  144  per  cent  was  found.  As  against  this  increase 
the  much  smaller  percentual  growth  of  the  same  business 
at  the  English  joint-stock  banks  between  the  years  1890 
and  1900  was  pointed  out,  the  number  of  which  had 
decreased  during  that  period  from  99  to  82  while  their 
deposits  had  grown  from  335,000,000  to  572,000,000 
pounds  sterling,  or  only  71  per  cent. 

It  is  always  easy  to  afford  both  to  friends  and  oppo- 
nents a  small  satisfaction196  of  this  sort  by  calculating 
percentages  and  proceeding  in  the  one  case — i.  e.,  of  the 
German  deposits — from  a  low  level,  and  in  the  other — 
i.  e.,  of  the  English  deposits — from  the  high  level  of 
£335,000,000  or  7,000,000,000  marks,  since  the  per  cent 
increase  in  the  case  of  the  English  joint-stock  banks,  in 
view  of  the  high  level  of  their  deposits  from  which  the 
start  is  made,  can,  in  the  nature  of  things,  be  but  small. 
It  follows  that  the  extent  and  gravity  of  the  fallacies  and 


200 


The     German     Great    Banks 

blunders  will  differ  merely  according  to  the  year  which 
is  chosen  as  the  base  of  comparison.  An  even  larger 
blunder  is  committed  by  those  who  calculate  first  the  ag- 
gregate deposits  of  the  savings  institutions,  credit  banks, 
note  banks,  and  cooperative  credit  societies,  and  then 
arrive  at  the  "  conclusion "  that  the  percentual  share 
held  by  the  credit  banks  in  the  aggregate  is  constantly 
increasing,  while  that  of  the  remaining  institutions  is 
constantly  decreasing.  This  is  a  graver  blunder  for  the 
reason  that  in  this  case  figures  of  entirely  different 
nature — namely,  of  deposits  in  savings  banks  and  those  in 
credit  banks  and  similar  institutions — are  thrown  together 
and  the  calculations  of  percentages  are  then  based  on  the 
totals  thus  obtained. 

It  is,  therefore,  not  surprising  that  with  such  methods, 
which,  however,  often  lead  to  important  economic  and 
legislative  conclusions,  startling  though  arithmetically 
correct  results  are  obtained,  showing  a  considerable  per- 
centual decrease  of  deposits  in  savings  institutions,  while 
the  absolute  figures  for  these  deposits  show  a  continuous 
and  almost  regular  increase  to  between  14,000,000,000 
and  15,000,000,000  marks  on  December  31,  1908,  for  the 
country  as  a  whole,  as  compared  with  2,750,000,000 
marks  of  bank  deposits. 

By  using  equally  fallacious  methods  it  is  quite  easy  to 
make  the  following  totally  different  calculations: 

In  1891 — i.  e.,  sixteen  years  ago — the  German  savings 
banks  had  about  5,250,000,000  marks  of  savings  de- 
posits.197 On  December  31,  1906,  they  held  13,250,000,000 
marks.  The  increase  was,  therefore,  almost  threefold. 
In  the  same  year,  1891,  the  143  German  credit  banks, 


201 


National    Monetary     Commission 

with  a  capital  stock  of  at  least  1,000,000  marks  each, 
had  386,000,000  marks  of  deposits.  On  December  31, 
1906,  these  deposits  were  2,250,000,000;  there  was  there- 
fore a  much  larger,  almost  sixfold,  increase. 

If,  however,  instead  of  1891  the  year  1900  is  chosen  as 
a  starting  point,  it  is  seen  that  the  deposits  of  the  Ger- 
man savings  banks  amounted  then198  to  approximately 
9,000,000,000  marks,  as  against  only  997, 000,000, 199  that 
is,  less  than  1,000,000,000  marks  deposited  in  the  German 
credit  banks.  As  compared  with  the  above  given  figures 
for  the  end  of  1906,  the  savings  deposits  are  seen  to  have 
increased  by  about  4,000,000,000  marks,  the  deposits  in 
the  credit  banks  by  much  less — i.  e.,  only  by  about 
1,500,000,000  marks.  In  other  words,  different  results 
will  be  obtained  by  percentual  calculations  according  as 
the  level  used  as  base  of  comparison  is  higher  or  lower. 

(2)  Deposits  in  foreign  countries. 

As  compared  with  the  aggregate  absolute  figures  of 
deposits  in  the  German  credit  banks  of  2,750,000,000 
marks  on  December  31,  1908,  and  approximately 
2,500,000,000  on  December  31,  1906,  the  corresponding 
aggregate  for  the  English  deposit  banks  (including  the 
Scotch  and  Irish  banks  as  well  as  the  Bank  of  England) 
may  be  estimated  at  about  6,250,000,000  marks  at  the  end 
of  1905.  According  to  Edgar  Jaffe  20°  their  current  and 
deposit  accounts  (gesamte  fremde  Gelder)  on  that  date 
aggregated  19,000,000,000  marks,  while  according  to  the 
London  Economist  of  May  19,  1906,  whose  lower  data  we 
shall  use  as  a  matter  of  caution,  they  aggregated  only 
16,750,000,000  marks.  If  of  this  total201  two-thirds  is 
allowed  for  current  accounts  and  only  one-third — which 


202 


The     German     Great    Banks 

is  too  low  rather  than  too  high  an  estimate — for  deposit 
accounts  (held  against  deposit  receipts  with  seven,  four- 
teen, and  more  days'  notice),  we  arrive  at  approximately 
the  above  total  of  6,250,000,000  marks — i.  e.,  an  amount 
equal  to  the  aggregate  outsiders'  funds  (gesamte  fremde 
Gelder)  held  at  the  end  of  1906  by  the  larger  German 
credit  banks  (with  share  capital  of  at  least  1,000,000 
marks  each) . 

To  these  6,250,000,000  marks  of  savings  accounts 
should  be  added  for  Great  Britain  (exclusive  of  Ireland) 
deposits  in  the  post-office  savings  banks  and  in  the  trus- 
tees' savings  banks  of  about  £21 6,500, ooo,202  equivalent 
to  about  4,500,000,000  marks — making  thus  a  grand 
total  of  10,750,000,000  marks.  These  latter  banks  have 
to  invest  their  available  funds  in  British  consols  and 
pay  a  fixed  rate  of  interest  of  2%  per  cent. 

In  the  United  States203  the  total  amount  of  visible 
deposits  of  all  kinds,  including  savings  deposits,  held  by 
banks  and  private  bankers  on  or  about  June  30,  1909, 
was  about  $14,100,000,000,  or  slightly  in  excess  of 
59,000,000,000  marks.  Of  the  total,  the  note-issuing 
national  banks  held  $4,898,500,000  (about  20,500,000,000 
marks)  while  other  banks  and  firms  held  9,209,000,000 
dollars  (about  38,678,000,000  marks).  Of  this  latter 
total,  $3,713,000,000  (about  15,595,000,000  marks)  rep- 
resented the  deposits  held  by  savings  banks,  $2,467,000,000 
(or  about  10^/3  billion  marks)  deposits  in  the  state  banks, 
about  $2,836,000,000  (or  11,911,000,000  marks)  deposits 
in  the  loan  and  trust  companies,  and  about  $193,000,000 
(or  810,600,000  marks)  deposits  held  by  private  bankers. 
The  national  banks  are  banks  of  issue;  there  is,  however, 


203 


National    Monetary     Commission 

no  central  institution  to  rediscount  their  bills.  A  series 
of  obligations204)  has  been  imposed  upon  the  national 
banks  by  twelve  acts,  especially  those  of  April  3,  1864, 
and  of  March  3,  1869,  viz: 

(a)  To  hold  a  cash  reserve  of  25  per  cent  of  their  deposits 
in  the  reserve  cities  and  of  15  per  cent  in  the  other  cities. 

(6)  To  publish  quarterly  statements  and  balance  sheets. 

(c)  Not  to  assume  obligations  in  excess  of  their  total 
liabilities,  less  bank  notes  and  deposits. 

(d)  Not  to  loan  to  any  single  person  a  total  amount  in 
excess  of  one-tenth  of  their  capital  stock   (a  provision 
which,  according  to  an  inquiry  made  in  1900,  about  40 
per  cent  of  all  national  banks  circumvented  by  subdividing 
accounts,  etc.). 

(e)  To  transfer  10  per  cent  of  the  dividends  to  a  surplus 
fund,  so  long  as  the  latter  is  below  10  per  cent  of  the 
capital. 

(/)  To  make  five  reports  each  year  to  the  federal 
comptroller  of  the  currency.  The  latter,  moreover,  may 
examine  the  banks  at  any  time  and  enforce  the  observance 
of  his  orders  and  of  the  legal  provisions  under  penalty  of 
closing  the  bank. 

The  above  comparison  shows  plainly  that  the  volume 
of  the  German  bank  deposits  even  now  is  relatively  small 
as  compared  with  that  found  in  England  and  in  the 
United  States.  It  also  seems  to  be  considerably  below 
that  held  by  the  French  banks.205 

(3)  Deposits  held  by  individual  Berlin  great  banks. 

The  following  figures  show  the  growth  of  deposits  in 
some  of  the  Berlin  great  banks  which  devoted  themselves 
first  and  most  energetically  to  the  deposit  business. 


204 


The     German     Great    Banks 

(a)  DEUTSCHS  BANK. 

The  amount  of  deposits  (expressed  in  millions  of  marks) 
held  by  this  bank  were: 


1872 

1882 

18 

1892 

62 

IQO2 

2  1  •! 

187-2 

7 

188^ 

22 

I  go  T. 

60 

IQO7 

2-27 

1874. 

II 

1884. 

27 

l8QA 

.  75 

IQO4. 

286 

1875 

.  12 

1  88s 

.  ^2 

iSOS 

.  85 

IQO5 

"3.4.1 

1876 

14 

1886.  . 

.  ^o 

l8Q6 

.  O"? 

1006 

181 

1877  . 

...  IO 

1887  . 

.  ^8 

l8Q7 

IO2 

IQO7 

4.76 

1878. 

Q 

1888.  .  . 

.  47 

I808. 

122 

IQO8 

4.80 

1870  . 

...  12 

1880  .  . 

•  47 

l89Q. 

.  155 

1880.  . 

.  n 

1800.  . 

.  52 

IQOO. 

.  IQI 

The  number  of  deposit  accounts  at  the  Deutsche  Bank 
rose  from  3,867  in  1883  to  21,771  in  1895,  the  latest  year 
for  which  the  respective  figures  are  available. 

It  may  be  seen  from  the  foregoing  table,  that  the  de- 
posits of  the  Deutsche  Bank  amounted  to  8,000,000  marks 
at  the  end  of  the  first  year  after  its  organization  and 
equaled  the  amount  of  its  capital  in  1894,  reaching  the 
total  of  489,000,000  marks  on  December  31,  1908,  as 
against  a  capital  on  that  date  of  200,000,000  marks.  The 
most  remarkable  feature  about  the  above  figures  (espe- 
cially in  view  of  the  above  mentioned  wide  extension  of 
the  term  "deposits")  is  the  almost  uninterrupted  growth, 
both  absolute  and  relative,  of  the  deposits  as  compared 
with  that  of  the  capital. 

The  number  of  deposit  accounts  increased  relatively 
much  more  than  that  of  other  accounts  (including  the 
current  accounts,  which  numbered  230,203  at  the  end  of 
1908). 

The  average  size  of  the  deposits  at  the  Deutsche  Bank 
has  steadily  decreased  from  4,138  marks  in  1883  to  2,570 
marks  in  1893  (no  later  data  have  been  published).  This 
goes  to  prove  that  the  aim  of  attracting  even  the  smallest 


205 


National     Monetary     Commission 

available  funds  is  being  more  and  more  thoroughly  at- 
tained. 

About  two-thirds  of  the  total  deposits  throughout  the 
period  have  been  held  by  the  central  office  at  Berlin. 

The  number  of  deposit  offices  was  74  at  the  end  of 
1908,  compared  with  12  in  1895  and  44  in  1905.  The  rules 
regarding  the  deposit  business  at  the  Deutsche  Bank  are 
reprinted  by  Joh.  Fr.  Schaer.206  The  principal  points, 
which  in  the  main  are  typical  for  all  the  large  banks,  are  as 
follows : 

(1)  The  minimum  deposit  must  be  100  marks. 

(2)  Each  depositor,  who  does  not  stipulate  a  fixed  term 
of  repayment,  receives  an  account  book  in  his  name,  in 
which  are  entered  all  deposits.     Bach  deposit  must  be 
accompanied  by  a  deposit  blank,  filled  out  by  the  depos- 
itor and  handed  to  the  cashier  together  with  the  amount 
deposited. 

(3)  The  account  books,  which,  however,  do  not  contain 
the  amounts  withdrawn  by  the  depositor,  must  be  pre- 
sented each  quarter  for  balancing. 

(4)  Deposits  repayable  at  a  fixed  date  are  made  against 
bank  receipts. 

In  case  the  amount  to  be  withdrawn  is  30,000  marks  or 
over,  written  notice  must  be  given  before  1 2  o'clock  of  the 
preceding  business  day. 

The  rates  of  interest  paid  on  deposit  are  published  by 
notices  at  the  tellers'  windows  of  the  deposit  branches  and 
may  be  changed  at  any  time;  this  change,  however,  does 
not  affect  rates  on  amounts  deposited  for  a  longer  term 
if  the  change  of  the  general  rate  is  made  prior  to  the 
stipulated  date  of  repayment. 


206 


The     German     Great    Banks 


Tl 


(6)  DRESDNER  BANK. 

The  deposits  of  this  bank  show  the  following  growth  (in 
millions  of  marks:) 


1876 

^  2 

i88s 

6  6 

1804. 

*o-  / 
20  6 

•3T"* 

IQO2 

Q^  2 

1877 

a  O 

1886 

114. 

1805 

•7T   I 

IQO^. 

.  .  108.  2 

1878  . 

2.  Q 

1887 

IO  4. 

1806 

-70  1  8 

IQOA. 

.  1^6.  7 

1870 

^.  6 

1888  .  .  . 

n.  8 

1807  . 

77.  A 

IQCK  . 

.  16^.  5 

1880...  . 

4.  O 

1880.  . 

1^.1 

1808  . 

SS.  2 

iqo6. 

.  IQQ.  O 

1881  
1882  
1883  

5-7 
4.8 

5-  i 

1890  
1891  
1892  

"•5 
13-7 
15-3 

1899.... 
1900.  .  .  . 

.  62.  9 
•  94-5 

1907.. 
1908.. 

.  .  .  224.  8 
...  224.5 

(c)  DlSCONTO-GESELIvSCHAFT. 

The  deposits  of  this  bank  show  the  following  growth  (in 
millions  of  marks) : 


1872 

*T?  M 

16  8 

1882 

21  O 

1802 

16  17 

*>v^ 
iqoi 

yc  o 

1877 

64.  8 

I88-*. 

1^2 

i  Sen 

iq  7 

iqO2 

78  8 

1874. 

^6  5 

1884. 

I  c  2 

l8Q4. 

2q  8 

iqo^ 

QI  O 

1875 

Q  2 

1  88s 

"^S  2 

180^ 

^4.  I 

iqO4. 

IOO  O 

1876  

1877 

n-3 

7  c 

1886  
1887. 

18.  13 

7.8 

1896..  . 
1807. 

•  •  38.3 

.  ^4.  O 

1905.. 
iqo6 

.  1  10.  0 

ICT   A 

1878 

7.  2 

1888  

2O.  2 

1898.. 

.  4^.  8 

iqo7. 

14-4.  ^ 

1870 

8.0 

1880.  . 

H.  7 

1800.  . 

•  4q.  ^ 

iqo8. 

218  s 

1880.. 

Q.  7 

1800.  . 

36.  .S 

It  should  be  noted,  however,  that  in  the  case  of  the 
Disconto-Gesellschaft  prior  to  1 908  deposits  included  both 
"creditors  on  current  account"  and  "deposits  repayable 
upon  notice. ' '  The  above  figures,  as  was  pointed  out  before 
(p.  70  and  note  94),  show  great  variations,  inexplicable 
by  the  mere  change  from  prosperity  to  business  depression 
during  the  respective  years.  Thus,  deposits  in  1872  show 
a  total  of  16,800,000  marks  (exact  figures  16,726,163 
marks) ,  in  the  following  year  the  total  reaches  64,800,000 
(exact  figures  64,788,366  marks) .  In  1874 tne  total  drops 
to  36,500,000  marks  (36,502,613  marks)  and  in  1875  even 
to  9,202,000  marks.  During  the  years  of  business  recov- 
ery, 1878  to  1880,  deposits  did  not  rise  above  7,000,000, 


207 


National    Monetary     Commission 

8,000,000,  and  9,000,000  marks;  in  the  following  years, 
1 88 1  to  1888,  they  are  considerably  larger,  though  vary- 
ing a  great  deal.  The  exact  figures  for  the  latter  period 
were  as  follows : 


Marks. 

l88l 19,784,613 

1882 20,  952,001 

1883 '. I3.2I6,  197 

1884 15,215,781 


Marks. 

1885 35,256,915 

1886 18,276,965 

1887 7.761,959 

1888 20, 205,  660 


But  inasmuch  as  up  to  the  1908  report  the  "daily  due 
credits"  were  grouped  not  with  "deposits"  but  with 
"creditors,"  it  would  be  correct  to  include  with  " de- 
posits "  the  respective  amounts,  if  these  were  known  for  the 
earlier  years. 

The  growth  of  deposits  during  the  decade  1901-1908 
on  the  whole  shows  but  little  oscillation. 

The  deposit  offices  of  the  Disconto-Gesellschaft  in  1908 
numbered  1 1,  as  compared  with  i  in  1895  and  8  in  1905. 

(d)  DARMSTADTER  BANK. 

The  growth  of  deposits  in  this  bank  (in  millions  of  marks) 
proceeded  as  follows: 


1870 

16.  i 

1880  .  .  . 

6.  i 

l8QO 

10.  q 

iqoo 

A  "I   2 

1871.  . 

22.  4 

1881  

18.  5 

1801 

n.  8 

iqoi 

46  8 

1872.  . 

12.  O 

1882  

20.  o 

1802 

4.  4 

IOO2 

67  o 

1873  

1874. 

27.3 

16  4. 

1883  
1884 

21.  2 
2O  7 

1893  
i8Q4207 

10.  6 

•2Q  2 

1903  
iqO4 

72.3 

1  74.  ^ 

1875  

12.8 

1885.. 

16.5 

i8qs.  . 

36.  2 

iqo">. 

147  8 

1876.. 

9.  I 

1886  .  . 

ic  2 

1896 

•2Q   7 

iqo6 

148   I 

1877.  . 

I.  O 

1887 

14  I 

1807 

-71  A 

TQO7 

161  ^ 

1878  
1879.. 

5-6 

5-7 

1888  
I88q.. 

I9.I 

10.  7 

1898  
l8qq.. 

37-i 

34..  q 

1908  

108.8 

(4)  Comparative  growth  of  deposits  in  all  German  credit 
banks  and  in  the  Berlin  banks. 

The  growth  of  deposits  during  the  last  20  years  in  all 
German  credit  banks  with  a  capital  of  at  least  one  million 


208 


The     German     Great    Banks 

marks  each,  numbering  at  present  158,  is  shown  by  the 
following  figures  (in  millions  of  marks) : 


1889..  . 

370.  98 

1894... 

486.  39 

1899.. 

812.96 

1904. 

1,565-96 

1890.  .  . 

408.  oi 

1895... 

493.  26 

1900.  . 

997.32 

1905- 

1,839.92 

1891.  .  . 

385.96 

1896..  . 

546.  42 

1901.  . 

1,035.  ii 

1906. 

2,  141.  12 

1892..  . 

389.  86 

1897... 

604.  39 

1902.  . 

i,  104.  13 

1907. 

2,423.69 

1893... 

377-  19 

1898... 

712.53 

1903.. 

i,  261.  25  1908. 

2,745.8! 

The  corresponding  aggregate  figures  (in  million  marks) 
for  all  Berlin  banks  were:208 


1889. 

..  130.99 

1894 

.  .  163.  69 

1899... 

338.  17 

1904. 

783.42 

1890. 

..  138.14 

1895 

.  .  196.  13 

1900.  .  . 

414.64 

1905- 

883.  82 

1891  . 

•  •  105-  34 

1896 

..  219.44 

1901  .  .  . 

447-  23 

1906. 

.  .  1,029.62 

1892. 

.  .  103.  25 

1897. 

.  .  228.  25 

1902  .  .  . 

501.22 

1907. 

.  .  i,  158.71 

1893. 

.  .  119.  90 

1898 

••  330.39 

1903-  •• 

578.24 

1908. 

.  .  1,246.97 

Of  the  total  deposits  in  the  German  credit  banks  about 
two-thirds  constitute  deposits  in  the  Berlin  great  banks. 
This  is  due,  on  the  one  hand  to  the  lack  of  zeal  in  fostering 
the  deposit  business  shown  by  the  other  credit  banks  as 
compared  with  the  Berlin  banks  (which  have  by  far  the 
larger  number  of  deposit  offices),  and,  on  the  other  hand, 
to  the  general  fact  of  the  concentration  of  capital  in 
Berlin.  The  five  greatest  Berlin  banks  on  December  31, 
1908,  held  the  7otto  wing  deposits: 

Marks. 

Deutsche  Bank 489,  238,  ooo 

Dresdner  Bank 224,  575,  875 

Disconto-Gesellschaft 218,  544,  301 

Darmstadter,  Bank 108,  814,  032 

Schaffhausen'scher  Bankverein 72,  335,  365 


Total i,  113,507,573 

Of  these,  the  Dresdner  Bank  and  next  to  it  the  Disconto- 
Gesellschaft,  both  of  which  opened  their  first  deposit  offices 
as  late  as  1896,  come  nearest  to  the  Deutsche  Bank  in 
the  successful  cultivation  of  the  deposit  business. 

Of  the  total  outsiders'  funds  (gesamte  fremde  Kapi- 
talieri)  held  by  the  158  credit  banks  with  a  capital  of  at 


90311 — ii- 


209 


National    Monetary     Commission 

least  1,000,000  marks  each,  the  following  percentages  are 
represented  by  deposits  proper: 

At  the  end  of —  Per  cent. 

1905 34-7 

1906 33.  9 

1907 36.  5 

1908 37.  o 

The  corresponding  percentages  for  the  Berlin  banks 
were: 

At  the  end  of —  Per  cent. 

1905 - 27.  5 

1906 27.5 

1907 31-5 

1908 38.7 

It  should  be  noted,  however,  that  during  this  period,  in 
addition  to  the  above  mentioned  banks,  only  the  Darm- 
stadter  Bank  was  carrying  deposit  accounts,  while  the 
JBerliner  Handelsgesellschaft,  the  Mitteldeutsche  Kredit- 
bank,  the  Commerz-  und  Disconto-Bank,  and  the  National- 
bank  fur  Deutschland  had  no,  such  accounts. 

Of  the  total  deposits  reported  at  the  end  of  1907  for  all 
banks  with  a  capital  of  at  least  i  ,000,000  marks  each,  47 
per  cent  (as  against  39  per  cent  in  1895)  fell  to  the  share 
of  the  Berlin  banks,  and  41  per  cent  to  the  share  of  the 
Deutsche  Bank,  the  Dresdner  Bank,  the  Disconto  Gesell- 
schaft,  and  the  Darmstadter  Bank. 

Between  the  years  1895  and  1908  deposits  increased 
relatively  much  more  in  the  Berlin  banks  than  in  the  pro- 
vincial banks,  though  deposits  in  the  latter  constitute  a 
larger  per  cent  share  of  their  total  " outsiders'  funds" 
(fremde  Kapitalien)  than  in  the  Berlin  banks.209 

On  the  whole  it  may  be  said  that — 

(i)  The  distribution  of  dividends  by  the  banks  is  be- 
coming steadier  in  proportion  as  their  deposit  business 
develops. 

210 


The     German     Great    Banks 

(2)  The  floating  and  issue  business  is  relegated    to  the 
rear  in  proportion  as  the  deposit  business  conies  to  the 
front. 

(3)  To  a  large  extent  it  is  the  credit  accorded  to  com- 
merce and  industry  by  the  German  credit  banks  from  their 
own  means  and  their  deposits  that  has  caused  the  develop- 
ment of  the  productive  powers  of  the  commercial  and 
industrial  classes.     It  is  this  factor,  combined  with  the 
increased  productive   power  of  agriculture,  which  made 
possible  the  remarkable  growth  of  the  purchasing  power 
of  all  classes  and  callings  of  the  nation.210 

This  fact  alone  should  suffice  to  keep  us  from  adopting 
ill-considered  "  reform  "  propositions,  equally  hazy  at  times 
both  as  regards  their  underlying  principles  and  their  future 
effects. 

B.   THE  OTHER  DEBIT-OPERATIONS  OF  THE   CREDIT  BANKS. 

Of  the  other  debit-operations  of  the  banks  the  greater 

o 

part  need  not  be  considered  in  this  connection,  since  the      \ 

L 

German  credit   banks  do  not  issue  bank  notes,  nor  do      * 
they   (with  the   exception  of   the  so-called  mixed  mort-  ^ 
gage  banks)  issue  mortgage  bonds,  or  other  bonds  (Schuld- 
verschreibungen) ,  such  as  were  intended  to  be  issued  by  the 
Credit  Mobilier. 

To  some  extent,  however,  the  credit  operations  of  the 
credit  banks  in  the  shape  of  bill  rediscounts,  bill  accept- 
ances, of  sales  of  drafts  or  in  the  line  of  current  accounts, 
or  in  the  form  of  mortgage  and  lombard  credit,  must  be 
treated  in  the  same  manner  in  which  these  forms  of  credit 
are  treated  when  taken  by  other  institutions. 


211 


National    Monetary     Commissio 


n 


•5 


The  details  of  these  operations  will  be  discussed  in  sub- 
sequent parts  of  the  volume.     Itjs,  how.ever,  proper  to 
e--at~4±iis_rjla^^  in  order 

to  raise  cash  offer  private  long-term  bills  for  rediscount 

& 

at  most,  and  even  this  rather  unwillingly,  in  foreign 
markets  or  to  their  own  clients,  but  never  at  the  bourse. 
Ordinarily,  however,  as  will  be  seen  below,  money  is  ob- 
tained at  the  Seehandlung  (Prussian  State  Bank)  by  means 
of  the  less  conspicuous  hypothecation  of  bills.  The  paper 
offered  for  rediscount  to  the  Reichsbank  either  consists  of 
short-term  private  bills,  or  else  of  such  long-term  bills  as 
may  shortly  fall  due. 

A  very  considerable  portion  of  the  bill  holdings  of  the 
Reichsbank  is  probably  made  up  of  the  rediscounted  bills 
of  the  credit  banks,  particularly  about  the  time  of  the 
1  monthly  and  quarterly  settlements,  when  the  demands 
upon  the  banks  on  the  part  of  the  business  community  are 
especially  heavy. 

It  is  also  asserted  —  though  it  would  be  difficult  to  prove 
it—  that  in  Germany  just  as  in  England,  the  credit  banks 
resort  to  large-scale  rediscounting  operations  at  the 
jteichsbank  and  at  other  credit  banks  and  banking  insti- 
tutions shortly  before  the  dates  when  their  balance  state- 
ments are  issued,  in  order  to  be  able  to  show  the  largest 
practicable  figures  under  the  heads  of  cash  on  hand,  giro, 
and  bank  credits.  It  goes  without  saying  that  such  assets 
are  counterbalanced  by  corresponding  liabilities  of  the 
banks  in  the  shape  of  bill  obligations  of  the  rediscounting 
banks. 

There  is  also  but  little  doubt  that  in  times  of  money 
scarcity  when  German  private  discount  rates  wrent  up 


212 


The     German     Great    Banks 


considerably,  while  money  rates  in  foreign  markets  were 
comparatively  low,  some  foreign  capital,  possibly  even  in 

considerable  amounts,  may  have  been  obtained  by  the  dis-  \ 

counting  of  German  bank  acceptances.  This  seems  to  have 
taken  place  on  a  particularly  large  scale  in  1899  at  London 
and  to  have  occasioned  caustic  remarks  directed  against 
this  practice  of  boarding-out  of  finance  bills 2n  "  made  in 
Germany,"  a  criticism  which  was  repeated  with  little  or 
no  reason  in  1908  regarding  the  then  numerous  American 
bills  of  like  character,  a  subject  which  is  discussed  later  on, 
on  page  278. 

The  practice  of  credit  ba&ks  of  "boarding  out^Jbills— 
i.  e.,  buying  at  home  private  bills  and  depositing  them  for  ^ 
short  terms  in  London  or  Paris  whenever  money  rates  are 
low  abroad  and  high  at  home — has  nothing  in  common212 
with  the  cases  above  cited.  This  practice  as  a  rule  par-  — 
takes  of  the  character  of  bona  fide  arbitrage  transactions, 
based  upon  the  differences  of  interest  in  the  domestic  and 
foreign  markets.  This  is  not  infrequently  done  by  the 
great  banks,  which  in  that  case  assume  the  risk  of  loss 
involved  in  an  unfavorable  turn  of  exchange  rates,  that 
may  occur  in  the  meantime. 

A  rather  different  practice  is  presented  by  other  re-  , 
corded  cases,213  involving  efforts  of  obtaining  abroad  the  r 
lacking  operating  capital  by  means  of  a  somewhat  hidden 
and  complicated  hypothecation  of  bills,  which  do  not  seem 
to  have  been  always  of  prime  quality.     Foreign  banking 
houses,   according  to  preceding  agreements,  are  said  to 
have  taken  from  the  German  credit  banks  the  "  discounted 
bills  indorsed  by  the  latter  and  permitted  themselves  to 
be  drawn  on  or  else  to  have  given  their  checks  on  Paris 


213 


National    Monetary     Commission 

or  London.  The  foreign  house  was  not  expected  to  dis- 
pose of  the  bills,  which  were  redeemed  shortly  before 
maturity,  either  by  means  of  fresh  bills  or  of  short-term 
bills  on  Paris  or  London.  The  bills  were  returned  bodily, 
the  giro  of  the  German  bank  was  canceled,  and  the 
same  bills  were  discounted  at  the  Reichsbank  five  or  ten 
days  before  maturity." 

It  is  patent  that  in  such  cases  the  German  credit  bank 
runs  heavy  risks  if,  during  the  interval,  a  financial  crisis 
develops  and  as  a  result  the  renewal  of  the  .operation  is 
refused. 

Another  practice  is  reported  by  Ad.  Weber.214  Accord- 
ing to  him,  credit  banks  at  first,  when  granting  credit 
to  their  clients,  drew  in  turn  upon  the  latter  to  their  own 
order,  disposed  of  the  bills  accepted  by  their  debtors,  and 
thus  procured  fresh  money  for  themselves.  According 
to  Weber,  this  practice  was  quite  common  in  eastern  Ger- 
many as  late  as  1901.  A  similar  procedure  (in  the  shape 
of  so-called  solo  bills — Solawechsel)  is  reported  by  von 
Lumm 215  to  have  been  quite  common  in  Alsace-Lorraine. 
It  is  also  stated 216  by  Schar  that  larger  and  smaller  bank- 
ing institutions  will  at  times  "  take  from  their  clients  ficti- 
tious, i.  e.,  indorsable  lombard  bills  and  have  themredis- 
counted  upon  the  additional  strength  of  their  indorse- 
ment"— a  statement  which  I  am  not  in  a  position  to 
verify.  I  judge,  however,  that  none  of  the  great  banks 
were  ever  guilty  of  any  of  the  above  practices. 

Generally  speaking,  the  practice  of  the  mutual  drawing 
of  accommodation  bills  between  credit  banks  may  be 
regarded  as  very  uncommon  in  Germany,  although  there 
has  been  no  lack  of  assertions  that  the  case  of  the  City  of 


214 


The     German     Great    Banks 

Glasgow  Bank,  in  England,  was  not  without  its  German 
counterparts.  That  bank  ''attempted  to  hide  its  enor- 
mous deficit,  the  result  of  excessive  credits  granted  to  a 
number  of  export  firms,  by  accepting  in  increasing  amounts 
drafts  of  these  firms,  also  by  taking  over  mere  accom- 
modation bills  drawn  by  these  firms  and  passing  them  on 
for  discounting. ' ' 217  Although  not  exactly  in  accord  with 
our  systematic  arrangement,  it  may  not  be  quite  out  of 
place  to  mention,  in  connection  with  the  deposit  business 
just  discussed,  that  the  credit  banks  often  undertake  the 
management  of  the  financial  transactions  (Kassenfiihrung) 
of  their  depositors,  by  attending  to  their  collections  and 
paying  their  obligations  on  their  current  and  check  ac- 
counts and  by  representing  them  in  giro,  postal-transfer 
and  clearance  operations. 

Regarding  the  giro  system  used  by  the  large  industrial 
and  commercial  firms,  which  in  Germany  is  at  present 
concentrated  in  the  Reichsbank,  some  data  were  given 
above  (p.  147),  where  mention  was  made  also  of  the  postal- 
transfer  business,  instituted  on  January  i,  1909.  The 
latter  institution  fills  a  serious  gap  so  far  as  the  class  of 
middle-sized  and  small  traders  is  concerned,  but  is  likely 
to  be  used  in  time  to  an  increasing  extent  also  by  private 
capitalists  and  public  treasuries. 

The  current-account  business  of  the  credit  banks  with 
their  customers  is  found  discussed  in  detail  below  (see 
Section  2,  II,  B). 

We  have  but  a  few  remarks  to  make  on  the  subject  of 
the  bank-check  business,  as  the  latter  does  not  come  prop- 
erly under  the  head  of  credit,  but  under  that  of  methods  of 
payment  (Zahlungsuerkehr.}  Accordingly,  it  is  treated  here 


215 


National    Monetary     Commission 

only  in  so  far  as,  like  the  "cash  keeping "  for  depositors,  it 
is  one  of  the  means  by  which  the  banks  attract  available 
funds  for  productive  uses,  thus  bringing  about  an  increas- 
ingly large  concentration  of  credit  at  the  banks  by  dis- 
pensing with  cash  for  payment  and  making  it  available 
for  the  purposes  of  credit. 

This  concentration  of  credit  brought  about  by  the 
check  system,  and  in  particular  the  agitation  in  its  favor 
carried  on  during  recent  years  in  various  ways  with  the 
consent  and  cooperation  of  the  Government,  including  the 
passing  of  the  check  act,  has  been  vehemently  attacked  by 
a  recent  writer,  who  takes  the  view  that,  by  the  "  artifi- 
cial fostering  of  the  check  and  deposit  system,"218  funds 
which  in  his  opinion  without  such  fostering  would  "pos- 
sibly" (p.  20)  or,  "surely"  (p.  21)  have  found  their  way 
into  other  channels  (on  this  point  see  II,  A,  2a)  are 
directed  to  the  banks,  where  they  are  turned  into  credit 
for  large-scale  industry  (p.  19). 

Now,  in  point  of  fact  the  agitation  for  the  adoption  of  the 
check  system  had  been  started  long  before  the  passage  of 
the  check  act,  and  the  recent  considerable  increase  of 
deposits,  on  the  basis  of  which  alone  checks  may  be  issued, 
likewise  antedates  the  passage  of  the  check  act. 

The  above  agitation  was  fully  justified,  in  view  of  our 
downright  naive  methods  of  payment,219  and  of  the  crying 
need  of  reform  in  this  field,  tending  to  dispense  with  the 
use  of  currency  which  might  thus  become  available  for  the 
purposes  of  credit.  Since  this  purpose  could  be  attained 
only  very  incompletely  without  the  apex  of  the  structure — 
i.  e.,  the  transfer  and  clearing  system — the  check  act  pro- 
vided for  tax-free  checks  (now  again  abolished)  only  in 


216 


The     German     Great    Banks 


case  these  checks  were  drawn  upon  such  public  or  private 
institutions  or  concerns  which,  like  banks  and  banking 
firms,  as  a  rule  participate  in  the  transfer  and  clearing 
system,  and  therefore  presented  the  best  guarantee  that 
the  real  purpose  of  the  check  system — the  redemption 
without  the  use  of  currency — would  actually  be  attained. 
As  a  matter  of  fact,  not  only  private  banks  and  banking 
firms,  but,  as  is  admitted  by  Lansburgh  (pp.  13-14),  like- 
wise public  banks,  credit  associations,  and  even  savings 
institutions  (under  certain  conditions) ,  were  authorized  by 
the  check  act  to  honor  tax-free  checks  drawn  on  them,220 
and  surely  it  can  not  be  said  of  the  savings  banks  that 
they,  like  the  cooperative  societies,  "deal,  in  the  main, 
only  with  a  definite  narrow  circle  of  persons." 

Despite  the  agitation,  the  use  of  checks  in  Germany  is 
still  insignificant,221  even  if  the  estimate  of  the  Statistical 
Journal  of  the  year  1902  may  have  been  somewhat  exag- 
gerated, according  to  which  the  liquidation  of  commercial 
transactions  in  Germany  required  from  nine  to  fifteen  times 
the  amount  of  currency  and  bank  notes  that  was  required 
in  Great  Britain. 

Notwithstanding  the  large  increase  in  the  use  of  checks 
since  that  year,  the  general  fact  noted  by  the  English  pub- 
lication is  only  too  true.  It  is  difficult  to  give  statistical 
data  regarding  the  extent  to  which  the  check  system  is  used 
in  Germany.  According  to  the  1 907  report  of  the  Deutsche 
Bank,  the  number  of  checks  paid  during  that  year  by  the 
Berlin  central  office  and  by  all  its  German  branches, 
amounted  to  over  10,000  per  day,  while  the  total  amount 
of  these  checks  was  about  5,000,000,000  marks  for  the  year. 
The  material  obtained  at  the  beginning  of  1909,  in  answer 


217 


National    Monetary     Commissio 


n 


to  an  inquiry  sent  out  at  my  request  to  all  the  German 
credit  banks  by  the  Central  Association  of  German  Banks 
and  Bankers,  can  be  used  only  in  so  far  as  the  banks  in 
their  replies  were  able  to  give  comparative  data  for  the 
years  1900,  1903,  and  1907,  as  well  as  to  indicate  sepa- 
rately their  check  business,  and  to  present  distinct  figures 
of  their  giro  business  with  the  Reichsbank,  which  in  the 
case  of  most  banks  is  lumped  with  their  cash  business. 
Full  information  along  these  lines  was  furnished  by  59 
banks  only,  and  the  data  furnished  by  even  these  institu- 
tions permit  only  of  the  general  conclusion  that  their 
check  business  has  grown  to  a  considerable  extent  since 
1900,  both  absolutely  and  relatively,  when  compared  with 
the  simultaneous  growth  of  their  cash  business.  This 
conclusion  is  confirmed  by  the  following  three  tables, 
though  it  would  not  be  quite  safe  to  draw  general  con- 
clusions from  these  data,  since  conditions  in  Oldenburg 
and  Mecklenburg  are  somewhat  peculiar  (see  below  Part 
IV,  Chapter  III,  Sec.  3,  II  B  3). 

Mecklenburgische    Hypotheken-    und    Wechselbank    (Mecklenburg    Mortgage 
and  Note  Bank). 


Number  of 
check  ac- 
counts. 

Amount  to  the 
credit  of  check 
depositors. 

Marks. 

1901  

1902  

12,  4OO 

1903  

I  2     826 

1904  

13    445 

23       78l      OQ7 

1905  .  . 

1906  

1907           .  . 

15    189 

1908  

218 


The     German     Great    Banks 


Oldenburgische  Landesbank  (Oldenburg  State  Bank) . 


Amount  to  the 
credit  of  check 
depositors. 

Number  of 
check  books 
issued. 

Number  of 
checks  paid. 

1900 

Marks. 

1901  

,  179   101 

647 

8,  939 

8^1 

1903  .                                                                         .... 

405   878 

1904  

,390,  ooo 

»  325 

25,  970 

915    098 

671 

36   458 

7906  

3.  243  ,  347 

43   066 

1907  

3  .  9S4i  464 

,326 

51  >  191 

1908.                                                                .    . 

4    172   598 

Oldenburgische  Spar-  und  Leihbank  (Oldenburg  Savings-  and  Loan  Bank). 


Amount  of 
deposits. 

Turnover. 

Number  of 
checks  paid. 

Marks. 

Marks. 
19   752  327 

1901  
1902  

i,  767,490 
i,  958,  398 

24,583,977 
3  i  ,  242  ,  725 

18,659 

22,  255 

1903 

1904  

1905  

1,930,392 

2  ,  348,  635 

36.079,704 
45  ,  870,  731 

27,686 
27,  918 

1906 

2     232     684 

1907  

2,  352,  81  i 

48,  850,  513 

32,  299 

1908  

2,  972,  897 

222  5  1  ,  097  ,674 

47,  319 

II.    THE    CREDIT    OPERATIONS    OF    THE     GERMAN 
CREDIT  BANKS  (LENDING  OF  CREDIT). 

(A)    INTRODUCTION. 

(i)  Observations  on  the  granting  of  general  bank  credit. 

In  view  of  the  rapid  increase  of  population  and  the 
correspondingly  rapid  development  of  credit  in  Germany 
both  during  the  first  and  second  periods,  it  is  not  sur- 
prising that,  except  in  a  few  directions,  German  banking 


219 


National    Monetary     Commission 

practice  has  not  yet  developed  definite  principles  in  the 
granting  of  bank  credit.  Generally  speaking,  the  dis- 
position shown  toward  the  banks  has  been  that  of  cap- 
tious criticism  rather  than  of  friendly  appreciation  of 
what  has  been  actually  achieved.  The  critics  should  not, 
however,  forget  that  even  the  oldest  German  credit 
banks  date  back  no  more  than  about  sixty  years,  and 
that  the  greater  part  of  these  banks  are  not  even  40 
years  old.  And  yet  in  this  relatively  short  period  of  four 
to  six  decades  our  German  credit  banks  have  been  obliged 
to  occupy  in  the  national  economy  the  place  held  by 
the  "maid  of  all  work"  in  the  private  household.  They 
were  called  upon  to  discharge  almost  simultaneously 
nearly  all  the  tasks  outlined  in  the  introduction  to  this 
book,  and  which  devolved  upon  them  as  the  champions 
of  the  energetic  and  progressive  classes  in  industrial  life. 
Except  such  tasks  as  came  within  the  sphere  of  special 
banks,  such  as  the  note  banks,  the  provincial  cooperative 
land  mortgage  associations  (Landschaften) ,  the  mortgage 
banks,  or  the  cooperative  societies,  the  credit  banks  had 
to  take  upon  themselves  all  or  nearly  all  the  tasks  which  in 
England  are  apportioned  as  a  rule  under  a  strict  division 
of  labor  among  deposit  banks  (with  a  further  subdivision 
between  city,  west  end,  and  suburban  banks),  merchant 
bankers,  colonial  banks,  and  even  bill  and  stock  brokers. 
In  the  internal  trade  of  the  nation  and  in  its  commercial 
relations  with  foreign  countries  it  was  incumbent  upon 
them  not  only  to  be  at  their  posts,  but  ever  to  occupy 
the  outposts,  to  ward  off  sudden  hostile  attacks  upon 
the  industrial  forces  of  the  nation,  and  to  ensure  their 
safe  and  uninterrupted  progress. 


220 


The     German     Great    Banks 


The  failure  of  the  banks,  therefore,  to  develop  clear, 
consistent,  and  organic  principles  for  the  regulation  of 
credit  transactions  and  the  lending  of  bank  credit  can 
occasion  no  surprise,  if  we  bear  in  mind  the  breathless, 
nerve-racking  activity  of  the  period  and  the  competition 
among  the  numerous  credit  banks.  It  has  been  asserted 
that  the  banks  are  the  "  directing  force  of  the  spirit  of 
industrial  enterprise"  of  the  nation.  This  claim,  how- 
ever, whether  made  by  the  friends  of  the  German  banks 
or  by  its  secret  or  open  enemies,  is  greatly  exaggerated. 
The  banks  can  indeed  exert  an  influence  on  the  extent 
and  the  rate  of  speed  of  production,  though  not  directly, 
but  only  indirectly.  They  can  do  so  only  to  the  extent 
that  they  assist  with  their  credit  in  the  development  of 
production  on  a  large  scale,  with  its  greater  division  of 
labor,  its  concentration  and  decentralization  of  estab- 
lishments. In  the  midst  of  industrial  progress  even 
the  banks  may  not  realize  that  production  is  too  much 
accelerated.  Excessive  production  does  indeed  lead  to 
exaggerated  demands  for  and  in  turn  to  excessive  lend- 
ing of  credit  by  the  banks.  But  even  if  the  mutual 
competition  of  the  banks  could  be  disregarded,  it  would 
be  naive  to  suppose  that  the  banks  might  suddenly  decide 
to  refuse  credit  to  their  great  industrial  customers, 
because  they  had  come  to  the  conclusion  that  production 
was  excessive  and  overdone.  When  evidences  of  this  are 
present,  together  with  other  symptoms  that  suggest  an 
impending  crisis,  the  banks  in  the  first  instance  can  do  no 
more  than  communicate  these  fears  and  issue  warnings  to 
their  clientele  as  a  whole.  Except  under  special  condi- 
tions, the  general  restriction  of  credit  is  not  to  be  expected, 


National    Monetary     Commission 

unless  the  general  industrial  situation,  or  the  general 
condition  of  the  banks,  makes  this  step  inevitable,  for 
the  sudden  restriction  of  credit  would  prove  ruinous  not 
only  to  individual  establishments,  but  might  under  given 
circumstances  bring  about  a  general  panic. 

In  a  just  appreciation  of  all  the  factors  at  work  in  our 
economic  development  we  must  not  forget  that  while 
the  banks  are  the  pioneers  and  the  greatest  promoters 
in  the  accumulation  of  capital,  the  growth  of  capital 
has  in  turn  been  influenced  and  accelerated  by  the  wonder- 
ful inventions  made  along  technical  and  other  lines  during 
recent  times. 

These  considerations  are  in  no  way  intended  to  deny  the 
justice  of  the  criticisms  repeatedly  and  emphatically 
made  with  reference  to  the  indiscriminate  granting  of 
credit.  On  the  contrary,  such  criticism  is  beneficial  so 
long  as  it  is  not  too  sweeping  and  does  not  reject  the 
whole  system  on  the  ground  that  errors  have  been  made 
in  single  cases,  or  makes  the  most  serious  charges  against 
the  administration  of  the  "nation's  wealth"  by  the 
banks. 

Nothing  would  be  further  from  the  truth  or  better 
calculated  to  call  forth  contradiction  than  to  deny  that 
many  grave  mistakes  have  been  made,  not  only  in  the 
flotation  of  securities — a  branch  of  banking  that  has 
absorbed  so  much  time  and  energy — but  also  in  those 
branches  which  are  concerned  with  the  facilitating  of 
payments  (Zahlungsverkehr)  and  the  granting  of  credit. 
I  have  deemed  it  my  duty  to  call  attention  conscientiously 
to  these  mistakes  in  every  section  of  this  book.  On  the 
other  hand,  nothing  would  be  more  one-sided  than  the 


The     German     Great    Bank 


failure  to  recognize  the  natural  causes  of  these  errors. 
So  long  as  mere  human  beings  are  at  the  head  of  such 
enterprises, errors,  though  sometimes  different  in  character 
and  direction,  are  bound  to  be  made  under  any  banking 
system.  These  can  be  avoided  in  part  or  lessened  only 
gradually,  as  a  result  of  the  experience  acquired  under 
the  system  itself,  as  affected  by  local  conditions. 

I  do  not  regard  it,  however,  as  an  error  in  the  just- 
named  sense  that  the  German  banks,  as  has  been  repeat- 
edly charged,  have  used  their  resources  and  their  organi- 
zation in  a  one-sided  and  excessive  manner  in  the  interests 
of  trade  and  industry,  and  too  little  in  the  interest  of 
agriculture,  a  charge  that  in  former  times  was  often 
brought  against  the  Reichsbank  (223) .  In  an  able  address 
on  the  "  Problems  of  the  Money  Market "  (m)  the  president 
of  the  Prussian  Central  Bank  for  Cooperative  Societies, 
Heiligenstadt,  has  pointed  out  that  "agriculture  in 
Germany  was  the  last  great  branch  of  industry  to  adopt 
the  modern  methods  of  money  and  credit  economy.  In 
consequence  it  found  the  instrumentalities  and  institu- 
tions of  the  money  market  already  firmly  shaped.  Agri- 
culture, therefore,  can  not  well  expect  that,  even  if  it 
were  possible,  trade  and  industry,  or,  in  other  words,  all 
other  business  interests,  should  be  subordinated  to  the 
special  needs  of  agriculture."  In  fact,  however,  such 
subordination  is  possible  only  to  a  slight  degree,  and  its 
scope  is  particularly  limited  in  the  case  of  the  Reichsbank. 
As  a  note  bank,  the  latter  must  see  to  it  that  its  notes,  or 
one  large  part  of  its  short-time  liabilities,  and  likewise  its 
other  short-time  liabilities  arising  from  its  giro  business, 
should  be  offset  by  corresponding  credit  business  (Activ- 
geschdfte) — i.  e.,  short-term  credit,  granted  by  way  of 


223 


National    Monetary     Commission 

discounting  paper  or  making  loans  on  collateral.  Now 
the  situation  is  essentially  the  same  in  the  case  of  the 
credit  banks.  Agriculture  requires  long-term  credit  to 
conform  to  the  extended  period  of  production  involved. 
Moreover  the  credit  needed  is  such  that  the  bank  can  not 
reimburse  itself  for  it  through  the  subsequent  issue  of 
stocks  or  bonds.  On  principle,  therefore,  the  credit  banks 
can  make  agricultural  loans  only  to  a  limited  extent.  Not 
having  an  adequate  knowledge  of  the  basic  conditions  of 
agriculture,  of  the  profitableness  of  such  undertakings,  or 
of  the  trustworthiness  of  the  managers  of  such  enterprises, 
the  banks  would  find  it  almost  impossible  to  allow  them 
blank  credit. 

In  agriculture  mortgage  credit  (Realkredit)  must 
naturally  play  the  leading  part.  Here,  however,  special 
organizations  based  on  landownership  must  step  in.  For 
a  number  of  years  this  has  been  done  in  an  adequate  meas- 
ure by  the  mortgage  associations  (Lands chaf ten)  and 
similar  public  institutions,  also  by  the  banking  institutions 
and  loan  banks  established  by  the  mortgage  associations, 
the  mutual  credit  societies  (numbering  about  1 6,000 225), 
and  the  mortgage  banks  for  urban  real  estate  on  the  one 
hand,  and  in  Prussia  the  State  Central  Bank  for  Coopera- 
tive Societies  on  the  other.  The  credit  based  on  mort- 
gages and  other  real  estate  security  which  has  been 
extended  to  German  landowners  must  be  estimated  at 
present  at  least  at  40,000,000,000  marks  ($10,000,000,000) . 

The  German  credit  banks  have  participated,  both 
directly 226  and  indirectly,  in  extending  such  credit  by  tak- 
ing part  iii  the  establishment  of  mortgage  banks,  making 
temporary  loans  on  personal  security  to  agriculturists  for 


224 


The     German     Great    Banks 


a  more  or  less  limited  period,  to  be  repaid  in  fall  or 
winter,227  thus  providing  for  the  needs  of  planting  and 
harvesting,  or  for  the  purchase  of  lean  cattle  and  the 
acquisition  of  equipment  and  raw  material  for  industries 
subsidiary  to  farming.  This  is  particularly  true  of  the 
provincial  banks  and  notably  of  the  very  small  banks, 
which  thus  seriously  impaired  the  liquidity  of  their  assets. 
It  may  be  said  that  these  operations  fall  essentially  within 
the  scope  of  the  local  banks,  as  these  are  in  a  better  position 
to  judge  of  the  trustworthiness  of  borrowers  on  personal 
security,  and  to  determine  the  probability  of  repayment 
of  such  loans.  Nevertheless  it  has  been  demonstrated  that 
"every  year,  during  the  season  when  young  and  lean 
cattle  are  purchased,  many  millions  of  marks  are  placed 
at  the  disposal  of  the  trade  by  the  Berlin  banks,  through 
the  intervention  of  the  local  banks."  228 

German  credit  banks  have  hithereto  done  little  for 
the  craftsmen  and  the  small  manufacturers  and  trades- 
men, except  when  the  banks  have  been  closely  connected 
with  the  cooperative  credit  societies  as  in  the  case  of 
the  Dresdner  Bank.  The  reason  for  this  lies  in  the  fact 
that  on  the  one  hand  unsecured  credit  (Blankocredit)  is 
naturally  out  of  the  question  in  most  of  these  instances, 
and  on  the  other  hand  no  proper  security  can  be  furnished 
for  personal  credit  (Personalcredit)  which  would  more- 
over have  to  be  in  most  cases  long-time  credit.  Moreover 
German  craftsmen,  small  business  men,  and  petty  traders 
have  been  reluctant  to  open  bank  accounts.  Unable  to 
maintain  adequate  balances,  these  classes  are  unwilling  to 
subject  themselves  to  what  they  presume  would  be  bur- 
densome conditions.  Moreover  as  checks  have  hitherto 

90311° — ii 16  225 


National    Monetary     Commission 

been  used  but  to  a  small  extent  and  long  book  credit  is 
customary  in  their  business,  the  aid  of  the  banks  in  making 
and  receiving  payments  was  not  thought  indispensable. 

As  things  stand,  there  is  still  much  to  be  done  through 
cooperative  credit  organizations  in  which  the  banks  can 
help  a  good  deal.  The  postal  transfer  and  check  system 
inaugurated  January  i,  1909,  will  prove  particularly 
beneficial  in  this  connection,  as  it  will  provide  the 
craftsmen  and  small  business  men  with  a  substitute  for 
bank  accounts,  which  few  of  them  now  have.  It  will 
induce  them  to  accumulate  with  the  post-office  for  use  in 
making  payments  not  only  cash  immediately  needed  for 
this  purpose,  but  also  such  sums  as  may  be  required  for 
that  purpose  in  the  more  distant  future.  This  will,  how- 
ever, come  about  only  gradually  owing  to  the  absence  of 
any  provision  for  paying  interest  on  balances  kept  on  de- 
posit with  the  post-office  department.  This  is  unfortunate, 
for  it  will  retard  the  adoption  of  the  new  system.  There  is, 
however,  one  good  feature  in  the  nonpayment  of  interest, 
in  that  it  will  serve  as  an  inducement  to  the  depositor  to 
use  his  deposits  in  excess  of  the  irreducible  minimum  of 
100  marks  required,  in  paying  off  his  debts  at  the  earliest 
possible  date.  This  would  be  a  good  beginning  in  the  direc- 
tion of  shortening  among  craftsmen  and  small  business 
men  the  period  for  making  payments,  a  highly  desirable 
reform,  heretofore  often  attempted  in  vain. 

The  Reichsbank  has  now  joined  in  the  postal  transfer 
system,  and  under  treaties  to  be  concluded  both  foreign 
private  institutions  and  postal  savings  banks  (see  p.  147) 
are  expected  gradually  to  join  in  the  system.  This  would 
lead  to  the  happy  result  of  bringing  about  the  organic 


226 


The     German     Great    Banks 

union  which  has  heretofore  been  almost  completely  want- 
ing between  the  giro  (transfer)  business  of  the  Reichsbank, 
ministering  chiefly  to  the  needs  of  the  large  industrial 
and  commercial  interests,  and  the  postal  transfer  system, 
which,  it  is  hoped,  will  meet  in  a  large  measure  the  needs 
of  the  craftsman  and  small  business  man. 

In  concluding  these  general  introductory  remarks  I  wish 
to  call  attention  to  the  following :  I  have  repeatedly  em- 
phasized the  fact  that  the  mighty  rush  in  the  development 
of  our  entire  industrial  life  and  of  our  system  of  bank 
credit  was  the  absolutely  inevitable  consequence  of  the 
rapid  increase  of  population.  We  must  not,  however, 
forget  the  point  on  which  Adolph  Wagner  has  often  in- 
sisted, namely,  that  this  growth  of  population  was  not  only 
a  cause  but  also  an  effect  of  the  excessively  rapid  growth 
of  our  general  industrial  and  credit  systems,  and  that  for 
this  as  well  as  other  reasons,  a  less  rapid  progress  would 
be  highly  desirable.  On  account  of  the  natural  causes 
pointed  out  above  (p.  89)  I  have  no  doubt  that  this  rate 
of  growth  in  population  will  not  prove  continuous.  In  the 
same  way,  and  from  equally  natural  economic  causes,  there 
will  undoubtedly  come  about  a  slackening  in  the  pace  of 
general  industrial  development,  and  with  it  in  the  expan- 
sion of  our  credit  system,  and  the  concentration  of  indus- 
try and  banking.  We  are  already  beginning  to  feel  this. 
Here,  too,  flood  tide  will  of  necessity  be  followed  by  ebb. 

This,  however,  absolves  no  one  from  the  duty  of  help- 
ing to  build  up  and  maintain  strong  dams  while  the  flood 
is  rising,  so  far  as  it  is  possible  and  practicable  to  do  so, 
in  order  to  keep  the  turbulent  waters  from  going  beyond 
all  bounds  and  inflicting  irreparable  damage.  However, 


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National     Monetary     Commission 

these  dams  must  be  erected  at  the  proper  points,  and  built 
by  experts  possessed  of  the  requisite  theoretical  knowledge 
and  adequate  practical  experience.  These  dams  should 
do  no  more  than  keep  the  river  in  its  natural  bed  and  un- 
less the  conditions  are  exceptional  and  the  reasons  for  a 
different  procedure  compelling,  the  dams  should  not  be  so 
constructed  as  to  force  the  river  to  seek  a  new  channel 
and  in  so  doing  destroy  flourishing  fields. 

I  also  wish  to  refute  another  view  which  has  found  fre- 
quent expression  of  late,  and  which  was  presented  also  be- 
fore the  Bank  Inquiry  Commission.  It  is  claimed  that  as 
a  result  of  their  connections  with  the  banks  and  the  system 
of  bank  credit,  private  concerns  have  to  an  increasing  ex- 
tent abandoned  the  policy  of  investing  their  reserves, 
as  formerly,  in  German  Government  securities.  These 
reserves,  it  is  contended,  have  been  pressed  by  the  banks 
into  the  service  of  German  trade  and  industry229 — that  is  to 
say,  have  been  put  into  channels  which  these  funds  "  would 
not  have  chosen  of  their  own  accord."  The  official  ap- 
pendices to  the  report  on  the  Imperial  financial  reform 
bill  of  1 908  23°  have  effectually  removed  every  ground  for 
such  assertion,  particularly  as  regards  recent  years.  They 
demonstrate  on  the  one  hand  that  the  German  investing 
public  have  displayed  an  extraordinary  and  increasing 
willingness  and  power  to  purchase  domestic  securities 
offering  safe  investment  and  a  steady,  though  relatively 
low,  rate  of  interest,  and  on  the  other  hand  that  both 
public  and  private  institutions  have  absorbed  but  a 
" relatively  small"  part  of  public  issues,  at  least  as  com- 
pared with  similar  institutions  abroad. 

It  is  true  that  among  these  "domestic  securities"  there 
are  included  municipal  loans  and  mortgage  bonds,  issued 


228 


The     German     Great    Banks 


by  German  public  and  private  institutions.  Bearing  in 
mind  the  considerable  issues  of  securities  by  the  Empire  and 
the  federal  states,  and  the  fact  that  comparatively  little 
of  this  is  in  the  possession  of  state  or  private  institutions 
in  Germany  and  foreign  countries,231  there  can  be  no  doubt 
that  by  far  the  greater  part  of  the  Imperial  loans,  and  of 
the  securities  issued  by  the  federated  states  is  in  the  hands 
of  the  German  public.  The  proportion  so  held,  it  appears, 
has  not  declined  in  the  past  decade;  on  the  contrary,  it 
has  increased,  and  the  increase  has  more  than  kept  pace 
with  the  growth  of  wealth  in  the  country. 

(2)   Observations  on  the  granting  of  industrial  credit  in 
particular. 

In  the  foregoing  it  has  been  pointed  out  that  one  reason 
for  the  failure  of  the  credit  banks  to  develop  in  this  period 
firm  and  consistent  principles  to  govern  industrial  credit 
lay  in  the  fact  that  even  now  part  of  these  banks  date 
back  only  six  decades,  the  rest  only  four  decades,  and  that 
in  this  period  they  were  called  upon  to  discharge  simul- 
taneously a  multiplicity  of  tasks.  Another  reason  lies  in 
the  fact  that  the  German  credit  banks  have  developed 
very  differently,  each  in  its  own  way  and  along  special 
lines.233  In  this  there  are  advantages  as  well  as  disad- 
vantages. A  further  reason  is,  that  German  industry, 
though  much  older,  did  not  begin  its  great  expansion 
before  the  second  period. 

German  industry  had  still  to  learn  slowly  and  gradually 
the  fundamental  principles  governing  the  taking  of  credit — 
as  to  kind,  amount,  and  the  right  time — in  the  same  way 
as  the  banks  had  to  evolve  the  fundamental  principles 


229 


National    Monetary     Commission 

applying  to  the  granting  of  credit.  It  can  not  be  doubted, 
therefore,  that  through  ignorance  of  correct  principles,  or 
an  overestimate  of  the  duration  of  a  period  of  prosperity 
or  as  the  result  of  a  certain  amount  of  megalomania  or 
of  competition,  sins  were  committed  on  both  sides,  in 
borrowing  as  well  as  in  lending.  It  can  be  demonstrated 
without  much  difficulty  that  in  many  instances  indus- 
trial ventures  took  too  much  long-term  credit  from  the 
banks,  or  took  it  at  the  wrong  time,  to  put  into  improve- 
ments, extensions,  or  new  construction,  sometimes  with- 
out stating  these  to  be  the  purpose  of  the  loans,  and 
that  the  banks  often  accorded  such  credit  to  industrial 
ventures  in  too  large  amounts  and  at  inopportune  times, 
sometimes  even  after  symptoms  of  an  impending  crisis  were 
apparent.  In  a  number  of  instances,  and  particularly 
before  the  panic  of  1901 ,  it  can  be  demonstrated  that  some 
banks  had  offered  their  credit  unsolicited  to  industrial  un- 
dertakings, or  "thrust"  it  upon  them,233  or  at  least  made 
it  so  easy  to  obtain  that  the  existing  mania,  great  as  it  was, 
for  new  construction  and  reconstruction,  was  further  in- 
tensified. It  should  not,  however,  be  forgotten  that  on  the 
other  hand  at  certain  times  the  opposite  charge  has  been 
made  against  the  German  credit  banks  that  they  were 
tying  up  their  resources  in  stock-market  speculation. 
"One  of  the  worst  results  of  the  present  situation,"  says 
Eberstadt  (Der  Deutsche  Kapitalmarkt,  Berlin,  1901, 
p.  115),  "is  that  industry  finds  'the  tables  all  taken'  and 
that  the  banks  are  positively  in  no  position  to  furnish 
adequate  credit  for  industrial  needs." 

Finally  it  has  undoubtedly  often  happened,  as  we  shall 
explain  more  fully  later,  that  German  credit  banks  have 


230 


The     German     Great    Banks 

lent  their  credit  to  industrial  concerns  according  to  the 
usual  principles — i.  e.,  by  granting  short-term  credit  to 
industry  in  the  same  way  as  to  commerce,  a  kind  of 
credit  well  enough  suited  to  commerce  but  as  a  rule 
entirely  unsuited  and  too  costly  for  industrial  needs. 
Lastly,  in  consequence  of  the  excessive  decentralization 
of  German  banking,  the  banks  in  granting  their  credit 
have  at  times  disregarded  the  principle  of  distributing 
the  risk,  giving  too  much  credit  to  one  industry,  or  one 
branch  of  industry,  or  even  a  single  establishment.  The 
Leipziger  Bank  went  under  because,  with  a  capital  of 
48,000,000  marks,  it  had  allowed  loans  to  the  extent  of 
93,000,000  marks  to  the  Trebertrocknungsgesellschaft 
(company  for  the  utilization  of  desiccated  lees) . 

The  Dresdener  Kreditanstalt  fur  Handel  und  Industrie 
failed  because  it  had  extended  too  much  credit  to  the 
Kummergesellschaft.  Aside  from  these  mistakes,  however, 
the  truth  is  that  the  capital  available  for  commercial  and 
industrial  enterprises  in  Germany  was  not  equal  to  the 
demand  and  capacity  for  industrial  expansion  existing  for 
the  most  part  independently  of  any  stimulation  by  the 
banks.  To  this  fact  more  than  any  other  are  to  be  at- 
tributed all  the  crises  that  have  taken  place.  Had  not 
the  banks  accumulated  the  available  capital  by  accepting 
deposits,  and  made  it  serviceable  for  productive  purposes, 
it  is  a  question  whether  this  maladjustment  would  not 
have  been  far  greater,  the  results  much  worse,  and  the 
crises  far  more  severe. 

If  the  reproaches  cast  on  German  banks  would  restrict 
themselves  to  the  formulation  of  the  charges  just  men- 
tioned, every  objective  critic  of  the  German  banking 


231 


National     Monetary     Commission 

system  might  readily  admit  their  justice,  the  more  so  as  it 
is  scarcely  imaginable  that  these  or  similar  mistakes  could 
have  been  avoided  in  any  other  banking  system,  where 
banks  have  had  an  equally  short  existence.234  The  injus- 
tice lies  in  the  exaggeration  which  has  unfortunately  gone 
to  great  extremes  and  taken  peculiar  forms.  This  is  par- 
ticularly unfortunate  for  the  reason  that  the  criticism  is 
rarely  accompanied  by  any  proposals  for  reform,  and  still 
more  rarely  with  any  practicable  proposals.  In  both  direc- 
tions the  climax  is  reached  in  a  work  bearing  the  some- 
what sensational  title  "The  management  of  the  nation's 
wealth."235  I  can  not  ignore  this  work,  because  the  au- 
thor's views  have  been  highly  appreciated  by  those  who 
are  opposed  on  principle  to  the  German  banking  system 
and  who  have  used  the  author's  arguments  as  grist  for 
•their  own  mills.  It  may  be  stated  that  the  author  was 
himself  a  bank  official,  though  not  indeed  one  of  the  bank 
directors  who  are  treated  with  such  scant  indulgence 
in  the  above  work  and  in  his  other  work,  entitled 
"The  German  Banking  System."236  That  which  is 
correct  or  partially  correct  in  the  book  had  been  said 
before  in  a  more  thorough  and  better  way  by  Heiligen- 
stadt  and  Bernhardt  in  the  "  Plutus  "  and  elsewhere — thus, 
for  example,  the  statement  that  the  banks  have  been  too 
ready  or  too  generous  in  granting  credit  to  industry  and 
that  thereby  they  have  increased  the  speed  and  extent  of 
the  process  of  Germany's  "industrialization" — a  point 
that  obviously  can  not  easily  be  proven.237 

This  is  moreover  expounded  with  endless  repetition, 
and  of  course  with  the  usual  embellishments  that  the 
control  of  the  "nation's  wealth,"  the  utilization  of  the 


232 


The     German     Great    Banks 

national  reserve  funds  (Betriebsreserve) ,  and  the  "  general 
industrial  development  of  Germany  "  ought  not  to  be  en- 
trusted to  a  "dozen  men"  (p.  24),  the  alleged  perversity 
of  whose  banking  policy  is  repeatedly  emphasized. 

The  substance  of  the  other  criticisms  which  Lansburgh 
makes  is  as  follows:  The  capital  accumulated  in  German 
credit  banks  through  deposits — he  insists  on  nearly  every 
page — is  not  utilized  in  accordance  with  the  wishes  of  the 
depositors.  On  the  contrary,  the  short-term  loans  to  the 
banks  are  to  a  considerable  extent  converted  into  long- 
time advances  to  industry,  and  accordingly  into  further 
industrial  investments.  It  is,  however,  "not  a  question 
(p.  17)  whether  the  credit  or  advances  made  by  the  banks 
are  beyond  cavil."  In  this  connection  the  distrustful 
remark  is  merely  made  (p.  16)  that  it  is  impossible  to 
tell  from  the  bills  what  their  character  is.  In  another 
place,  however  (p.  15),  it  is  expressly  admitted  that  the 
"  banks  have  up  to  the  present  followed  sound  principles 
in  maintaining  the  proper  liquidity  of  their  resources;" 
furthermore  (p.  n)  that  "for  economic  and  ethical 
reasons  it  is  absolutely  necessary  that  promotions  and 
improvements  should  go  on;"  that  "the  banks,  as  a  matter 
of  fact,  in  determining  the  amount  of  capital  to  be 
invested  in  an  establishment  or  branch  of  industry,  are 
guided  by  its  earning  power"  (p.  10),  and  finally  that 
"provided  due  care  is  exercised  in  the  make-up  of  the. 
different  classes  of  investments,"  we  may  regard  the 
conditions  as  sound  (p.  15)  "so  long  as  the  existing 
practice  is  continued  of  investing  40  per  cent  of  the 
depositors'  money  in  bills  and  the  other  60  per  cent  in 
loans  to  customers."  According  to  the  author,  however, 


233 


National    Monetary     Commission 

the  criticism  of  a  national  banking  policy  should  be  pri- 
marily based  upon  considerations  of  general  industrial 
interests  rather  than  of  private  interests  (p.  17).  He 
therefore  insists  that  bill  credit  and  advances  be  granted 
only  to  such  enterprises  "  as  would  have  been  granted 
such  credit  by  the  individuals  who  constitute  the  banks' 
creditors,  if  they  had  been  disposing  of  their  money 
independently,  without  the  intervention  of  the  banks." 
This  (ibid.)  would  not  yet  mean  that  "every  interest  would 
come  into  its  own,  that  agriculture  would  receive  its 
proper  share  in  the  same  way  as  industry,  the  govern- 
ment in  need  of  funds,  as  well  as  the  private  individual 
seeking  credit.  At  any  rate,  however,  there  would  be 
nothing  arbitrary  about  it."  For,  as  stated  in  another 
passage  (p.  20),  "the  depositor  may  have  had  in  mind 
buying  German  bonds  or  mortgage  bonds  or  acquiring  an 
interest  in  a  business  enterprise. "  In  a  still  more  prophetic 
manner,  we  are  told  on  page  21,  that  "without  the  inter- 
vention" of  the  banks,  the  deposits  "would  surely  have 
been  devoted  to  different  uses.  They  would  have  been 
invested  in  government  bonds  and  would  have  become 
available  to  the  government  for  other  than  purely  indus- 
trial purposes.  A  part  of  the  deposits  would  have  gone 
to  the  small  dealers,  craftsmen,  and  agriculturists." 

As  to  these  claims  it  w^ould  really  be  sufficient  to  ask, 
How  does  the  author  know?  It  is,  however,  necessary 
to  add  that  the  author  would  surely  have  arrived  at 
quite  different  conclusions  if  he  had  carefully  investi- 
gated these  points,  and  likewise  his  fundamental  assump- 
tions which  we  shall  examine  now  more  closely,  for  upon 


234 


The     German     Great    Banks 

closer  examination  it  is  hard  to  take  his  contentions 
seriously. 

As  the  author  has  properly  observed,  in  an  article238 
which  appeared  almost  at  the  same  time  his  pamphlet 
was  published,  the  available  resources  are  generally 
composed  of  "very  many  small  sums  of  money,  each  of 
which  taken  alone  would  remain  unproductive."  These 
are  made  available  for  productive  uses  only  because  the 
credit  banks  have  for  decades  persisted  in  the  laborious 
work  of  bringing  them  together.  As  I  have  shown  else- 
where, the  intervention  of  the  banks  has  made  it  possible 
for  these  small  amounts  to  render  to  industry  in  general 
far  greater  service  than  could  have  been  rendered  by  them 
singly  in  the  hands  of  the  depositors,  each  one  trying  to 
utilize  his  amount  without  the  help  of  any  intermediary.239 
Were  it  not  for  the  intervention  of  the  banks  these 
amounts  would  have  remained  idle  in  the  hands  of  the 
depositors,  their  small  size  making  them  unsuited  for 
productive  investment. 

As  this  money  has  become  available  only  through  .the 
activity  of  the  banks,  it  is  impossible  to  set  up  as  a  prin- 
ciple governing  its  management  and  investment  that  it 
should  be  used  only  for  those  purposes  and  undertakings 
for  which  the  various  creditors  of  the  banks  might  have 
intended  them,  "had  they  acted  independently  and  with- 
out the  intervention  of  the  banks  in  the  disposition  of 
their  funds."  It  is  more  than  likely  that,  had  it  not  been 
for  this  intervention,  they  would  in  most  cases  have  made 
no  use  whatever  of  their  money,  and  least  of  all  used  it 
for  industrial  investment,  but,  following  tradition,  would 


235 


National     Monetary     Commission 

have  let  it  lie  idle  and  yielding  no  interest,  a  situation 
which  even  Lansburgh  would  scarcely  think  ideal. 

If  nevertheless  the  ' '  wish  of  the  individual  depositors ' ' 
be  accepted  as  decisive  in  the  matter  of  investing  their 
deposits,  in  spite  of  the  fact  that  this  wish  is  not  commu- 
nicated to  the  banks,  and  can  scarcely  be  divined  by 
them,  no  one  would  seriously  contend  that  the  present 
situation  would  be  improved  and  not  rather  be  made 
much  worse.  For  without  being  able  to  do  so  with  abso- 
lute certainty  the  banks  with  their  experience  and  expert 
knowledge  can  ascertain  far  more  correctly  than  the  indi- 
vidual depositors  the  conditions  of  the  market  for 
different  sorts  of  investments,  the  general  state  of  industry, 
the  actual  condition  and  the  prospects  of  a  given  branch 
of  industry,  trade,  or  agriculture,  and  the  trustworthiness 
of  borrowers  to  whom  bill  credit  or  credit  on  current 
account  is  to  be  granted.240 

Morever,  it  is  evidently  wrong  to  assume  that  the 
depositors,  if  left  to  their  own  decision,  " might"  have  or 
" surely"  would  have  wished  a  different  disposition  of 
their  deposits  than  that  actually  made  by  the  banks. 
In  the  first  place  by  far  the  larger  part  of  the  deposits 
in  German  credit  banks  is  made  up  of  the  working  re- 
serves of  business  men  and  of  other  temporarily  available 
funds  of  capitalists — in  other  words,  of  the  funds  of  persons 
thoroughly  capable  of  reading  a  bank  balance  sheet.  In 
regard  to  the  investment  of  deposits,  these  statements 
convey  the  information  which  Lansburgh,  too,  has  been 
able  to  get  from  them.  Thus  it  is  certain  that  the  ma- 
jority of  depositors  do  not  object  to  the  way  in  which 
their  deposits  are  invested,  in  particular  to  the  investment 


236 


The     German     Great    Banks 

in  industrial  credit  in  the  shape  of  bills  or  of  current 
accounts.  Unless  this  were  so,  noting  the  condition 
appearing  from  the  bank  statement,  they  would  betake 
themselves  with  their  funds  to  cooperative  credit  societies, 
or  to  the  savings  banks  in  case  they  wished  that  the 
greater  part  of  their  deposits  be  invested  in  mortgages 
or  if  they  regarded  the  savings  banks  as  safer. 

It  is  highly  instructive  in  this  connection  to  note  the 
prevalent  opinion  among  the  Federation  of  German  Sav- 
ings Banks  as  voiced  in  the  testimony  given  before  the 
Bank  Inquiry  Commission  by  an  expert,  closely  associated 
with  the  savings  banks,  that  about  one- third  of  the 
deposits  in  the  savings  banks  are  temporary  in  character, 
intrusted  to  the  savings  banks  by  persons  belonging  to 
the  middle  or  even  higher  classes,  "  who  know  exactly  why 
they  deposit  their  money  in  the  savings  banks,  even  if 
only  temporarily."  The  percentage  is  particularly  inter- 
esting because  it  corresponds  almost  exactly  to  the  pro- 
portion of  the  deposits  in  the  credit  banks  which  may  be 
designated  as  "savings  deposits."  If  this  be  so,  and  I 
have  no  reason  to  doubt  it,  it  proves  that,  as  a  matter  of 
fact,  a  large  number  of  persons  who  are  thoroughly 
familiar  with  financial  affairs241  prefer  to  put  into  the 
savings  banks  funds  that  are  only  temporarily  available 
pending  permanent  investment — funds  better  suited  for 
deposit  in  credit  banks. 

From  this  we  may  further  infer  that  in  intrusting  such 
deposits  to  the  credit  banks,  or  in  leaving  them  there,  the 
class  of  depositors  just  mentioned,  or  those  still  better 
situated,  do  so  with  a  full  appreciation  of  the  way  in 
which  these  funds  are  invested.  Nothing  becomes,  there- 
fore, of  the  assertion  that  were  it  not  for  the  banks  this 


237 


National     Monetary     Commission 

very  class  of  persons  would  have  turned  their  money  over 
to  the  small  dealers,  craftsmen,  and  farmers,  or  to  "the 
Government."  Lansburgh  himself  admits  it  as  true  in 
a  special  case  that  the  classes  from  which  the  deposit- 
ors of  the  bank  are  drawn  know  exactly  what  they  are 
doing,  for  elsewhere242  he  remarks  that  "as  an  imme- 
diate result  of  every  boom  in  industry  and  trade,  part  of 
the  money  deposited  with  the  banks  is  withdrawn  and 
invested  in  the  most  profitable  branches  of  business." 
This  is  another  reason  why  we  cannot  admit  that  through 
the  activity  of  the  banks  "  these  savings  are  forced  into 
investments  which  they  would  not  have  sought  of  their 
own  accord  "  (p.  12). 

Finally,  if  it  be  true  that  the  German  credit  banks  have 
given  their  credit  predominantly  to  industry  and  trade 
(we  must  not  forget  the  latter,  particularly  the  export 
and  import  trade) ,  it  is  a  question  whether,  aside  from  a 
generous  participation  in  government  loans,  this  after  all 
is  not  necessarily  the  chief  sphere  of  operation  for  the 
credit  banks. 

We  have  seen  how  mortgage  and  other  land  credit,  with 
a  constantly  increasing  specialization,  has  been  widely 
extended  and  developed  in  a  "truly  exemplary  way" 
(I/ansburgh,  p.  5)  to  meet  the  needs  of  agricultural  and 
urban  real  estate.  Their  credit  wants,  and  particularly 
those  of  agriculture,  are  met  by  the  cooperative  credit 
societies,  the  land  mortgage  associations  (Lands cha fieri)  ,243 
and  the  banks  and  other  institutions  which  they  have 
founded,  the  mortgage  banks,  and  the  Central  Prussian 
Bank  for  Cooperative  Societies,  and  other  institutions  of 
the  same  kind.  We  have  also  seen  that,  thanks  to  the 


238 


The     German     Great    Banks 

16,000  cooperative  societies,  almost  the  same  may  be  said 
of  facilities  for  credit  on  personal  security  (organized  for 
the  purpose)  of  craftsmen  and  small  business  men,  and 
that  through  the  postal  transfer  and  check  system  an 
urgently  needed  improvement  will  be  introduced  in  the 
facilities  for  making  payments.  We  have  furthermore 
given  the  reasons  why  dealings  with  the  credit  banks  and 
bank  credit  are  little  adapted  to  the  needs  of  these 
classes,  and  are  therefore  but  little  resorted  to  by  them. 

What  is  the  inevitable  conclusion  from  all  this  so  far  as 
the  banks  are  concerned  ?  Their  domain  is  industry  and 
trade  (Lansburgh,  p.  5) ,  though  not  their  exclusive  domain, 
as  is  evident  from  the  fact  that  they  have  lent  their  credit 
to  the  State,  the  municipalities,  etc. 

It  has  been  clearly  shown  that  it  was  not  the  banks 
that  brought  about  the  industrialization  of  Germany, 
but  certain  elementary  economic  causes  working  with 
irresistible  force. 

It  is  equally  certain  that  even  under  the  least  favorable 
circumstances  the  banks  have  stood  by  the  Empire  and 
the  Federal  States  in  raising  funds.  This  alone  proves  that 
another  of  I^ansburgh's  contentions  is  incorrect,  namely, 
that  as  a  result  of  the  credit  activities  of  the  banks  the 
reserves  of  individuals  and  private  establishments  are 
no  longer  invested  in  securities  yielding  a  fixed  income. 
The  very  opposite  of  this  is  proved  by  the  appendices  to 
the  report  on  the  imperial  financial  reform  bill.  Nothing, 
then,  remains  of  all  of  Lansburgh's  contentions,  beyond 
the  fact  admitted  on  all  sides  that  the  industrialization 
of  Germany  has  proceeded  too  rapidly.  This  is  due  to 
a  number  of  causes  (no  one  can  determine  in  what 


239 


National    Monetary     Commission 

proportion) :  to  the  rapid  growth  of  population,  the  tre- 
mendous demand  for  credit  made  by  trade  and  industry, 
occasioned  in  turn  to  a  large  extent  by  the  justifiable 
struggle  against  foreign  competition,  and  finally  to 
occasional  mistakes  by  the  banks  in  granting  credit. 

This  may  suffice  in  criticism  of  I^ansburgh's  conten- 
tions. 

I  shall  now  turn  to  the  much  better-grounded  reason- 
ing and  proposals  of  the  late  Felix  Hecht,  whose  views, 
based  on  sound  knowledge  of  the  theory  and  practice  of 
German  banking,  were  recently  made  public 244  in  connec- 
tion with  his  earlier  treatment 245  of  the  subject. 

In  this  connection  a  welcome  opportunity  is  offered  to 
supplement  these  ''introductory  observations"  on  indus- 
trial credit  in  a  number  of  points.  This  at  the  same  time 
justifies  a  more  careful  examination  of  Hecht 's  proposals 
in  this  part  of  the  book. 

Hecht 's  proposals  are  in  effect  that  there  should  be 
established  a  central  institution  for  long-time  credit  which 
should  issue  debentures  indorsed  to  bearer,  and  render 
assistance  as  nearly  as  possible  to  all  branches  of  German 
industry.  These  debentures  are  to  be  issued  either  on  the 
basis  of  securities  taken  over  from  the  particular  industrial 
establishments,  or  directly  and  without  such  underlying 
securities.  They  are  to  bear  the  indorsement  and  guaran- 
tee of  the  central  institution.  Bearing  a  higher  rate  of 
interest,  maturing  earlier  (an  amortization  of  7  to  8  per 
cent  as  a  rule  being  provided) ,  and  being  attended  with 
greater  publicity,248  the  debentures  of  the  central  institu- 
tion would,  in  Hecht's  opinion,  have  great  advantages  over 
existing  industrial  bonds.  Moreover,  owing  to  the  wider 


240 


The     German     Great    Banks 

distribution  of  risks,  the  security  of  these  obligations  would 
be  greater.  In  the  first  place  the  central  institution  would 
extend  its  activities  to  all  kinds  of  industrial  undertak- 
ings which  might  present  an  assured  earning  power. 
Furthermore,  the  earning  capacity  of  these  establishments 
could  be  investigated  by  it  more  carefully  than  by  the 
credit  banks.  Unlike  the  credit  banks,  the  central  institu- 
tion could  have  at  its  command  a  large  staff  of  technical 
and  commercial  experts,  who  would  be  in  a  particularly 
favorable  position  to  accumulate  a  very  large  and  valu- 
able stock  of  specialized  experience.  The  supposed  urgent 
necessity  for  establishing  such  an  institution  is  based  on 
the  great  difficulties  which  the  credit  banks  encounter 
to-day  in  adopting  a  rational  policy  as  regards  the  grant- 
ing of  industrial  credit. 

We  must  accordingly  begin  by  testing  the  correctness  of 
these  premises.  For  this  purpose  it  will  be  necessary  to 
discuss  the  conditions  and  the  general  principles  under- 
lying industrial  bank  credit,  particularly  as  contrasted 
with  commercial  bank  credit,  in  so  far  as  these  have  not 
been  adequately  dealt  with  in  these  "preliminary  consid- 
erations," and  in  my  remarks  in  the  Verhandlungen  der 
Mitteleuropaischen  Wirtschaftskonferenz  (Transactions  of 
the  Central  European  Economic  Conference)  in  Berlin 
(May  17  and  18,  I9O9)247  to  which  I  refer  the  reader. 
With  reference  to  this  the  following  points  maybe  made: 
i .  The  technique  of  commercial  credit,  which  has  been 
generally  well  developed  by  the  German  credit  banks,  is  not 
identical,  as  Hecht  rightly  maintains,  with  the  technique 
of  industrial  credit.  The  latter  is  far  from  being  as  well 
developed  by  the  German  banks  as  the  former. 


90311°— ii 17  241 


National    Monetary     Commission 

(a)  Whenever  industrial  credit  is  given,  the  creditor 
is  obliged  to  make  sure,  throughout  the  continuance  of 
the  loan  that  the  credit  allowed  has  actually  been  used 
for  the  purpose  for  which  it  was  solicited.  This  he  is 
seldom  in  a  position  to  do.  In  commercial  credit,  on  the 
contrary,  this  is  not  necessary,  or  at  least  not  to  the  same 
extent.  Even  when  short- time  industrial  credit  is  given  to 
serve  as  working  capital,  the  creditor  is  at  all  times  obliged 
to  keep  watch  over  it  and  to  see  that  it  is  not  used  in  a 
manner  at  variance  with  the  purpose  and  character  of  the 
loan,  by  being  put  into  permanent  improvements,  for 
this  would  mean  the  tying  up  of  an  equal  amount  of 
the  bank's  capital.  Such  supervision  can  be  exercised 
only  with  great  difficulty. 

(6)  For  this  reason,  also  because  of  the  resulting  risk, 
which  is  greatly  augmented  by  the  lack  of  technical 
knowledge  on  the  part  of  the  bank,  it  is  decidedly  inad- 
visable for  credit  banks  to  participate  directly  to  any  large 
extent  in  industrial  enterprises.  The  instances  in  which 
the  banks  became  industrial  entrepreneurs  have  for  the 
most  part  not  turned  out  to  their  advantage.  Direct  par- 
ticipation (not  always  voluntary)  in  the  sense  of  taking 
over  permanently  stocks  and  bonds  of  the  enterprise,  is 
less  objectionable  in  itself,  but  even  this  is  likely  to  prove, 
under  unfavorable  conditions,  a  burden  upon  the  bank's 
resources  and  may  result  in  serious  impairment  of  the 
liquidity  of  the  bank's  assets. 

(c)  In  commerce  the  general  practice  is  to  give  short- 
time  credit  on  personal  security,  well  suited  to  com- 
mercial needs.  It  is  necessarily  renewed  frequently  or 
increased,  or  if  not,  a  proportionately  higher  rate  of  com- 


242 


The     German     Great    B 


a  n 


mission  is  stipulated.  But  such  credit  is  in  many  respects 
far  too  costly  for  industry,  and  often  directly  oppressive. 
In  industry  such  credit  is  needed  only  for  the  transitory 
purpose  of  paying  wages  and  salaries  and  obtaining  the 
working  capital  required  either  regularly,  at  more  fre- 
quent intervals,  or  only  once  a  year,  for  freight  and 
insurance  premiums,  for  the  purchase  of  raw  material,  and 
other  means  of  operation.  Even  this  short-term  transitory 
industrial  credit  to  provide  for  wages  and  working  capital 
is  not  entirely  conformable  to  the  rules  and  requirements 
of  short-term  commercial  credit,  for  here  frequent  renewals 
and  increased  borrowings  are  out  of  question.  Still,  as  a 
rule  it  can  be  repaid  more  quickly  than  credit  intended  for 
capital  outlays.  Nevertheless  it  is  objectionable  for  credit 
banks,  for  it  often  happens  that  it  can  not  be  taken  out  of 
current  income,  and  thus  tends  to  develop  into  permanent 
credit  (Anlage-Kredit) ,  contrary  to  the  intention  of  either 
party,  or  at  least  of  the  bank.  In  case  payment  is  de- 
faulted at  maturity,  a  suit-at-law  is  for  the  most  part  out  of 
question,  not  only  for  business  reasons,  but  also  because 
such  a  suit  might  lead  to  far  more  serious  consequences. 

(d)  In  view  of  the  need  for  constant  supervision  with 
reference  to  the  stipulated  use  of  the  loan  (see  remarks 
under  section  "a")  which  is  far  more  urgent  in  industrial 
credit  than  in  commercial  credit,  a  stipulation  that  a  given 
given  industrial  establishment  should  not  deal  with  various 
banks  and  bankers  would  seem  particularly  proper. 

Hecht 248  and  Ad.  Weber 249  criticise  the  German  credit 
banks  on  this  ground,  charging  them  with  having  fre- 
quently violated  this  principle,  and  pointing  to  the  Ter- 
linden  case,  where  no  fewer  than  14  banks  and  bankers 


243 


National    Monetary     Commission 

had  suffered  severe  losses  through  ignorance  of  one 
another's  action.  This  criticism  is,  however,  unjustified. 
From  personal  knowledge  of  one  of  the  contracts  made 
with  the  Terlinden  Company  I  know  that  with  a  view  to 
supervision  in  this  respect  it  was  expressly  agreed  that 
the  company  should  not  deal  with  other  banking  establish- 
ments .  Such  an  agreement ,  however ,  is  entirely  unavailing 
in  the  case  of  a  dishonest  debtor,  and  particularly  one  who 
falsifies  not  only  the  books  but  also  the  underlying  records 
(letters,  vouchers,  etc.) .  In  that  particular  case  the  situa- 
tion would  not  have  been  easily  revealed,  even  if  the  books 
had  been  audited,  a  step  for  which  there  was  no  occasion 
in  the  absence  of  any  knowledge  that  the  contract  had 
been  violated. 

Effective  service  in  this  direction  could  be  rendered  only 
by  a  central  credit  bureau  established  by  the  credit  banks 
themselves  to  which  they  might  report  the  names  of  the 
borrowers,  and  the  amount  and  kind  of  credit  granted, 
without  stating  the  name  of  the  creditor  bank.  It  would, 
however,  be  exceedingly  difficult  to  establish  such  an  in- 
stitution, not  only  because  of  the  mutual  competition 
among  the  credit  banks  but  above  all  on  account  of  the 
imperative  necessity  of  business  secrecy. 

2.  The  lending  of  short-term  commercial  credit  is,  gen- 
erally speaking,  less  hazardous  than  the  granting  of  indus- 
trial credit. 

(a)  Disregarding  the  cases  where  unsecured  credit  is 
allowed  to  a  manufacturer,  in  which  case  the  terms  and 
conditions  are  the  same  as  in  commercial  credit,  and  con- 
sidering the  problem  of  secured  loans,  we  are  concerned 
primarily  with  secured  credit  given  on  the  hypothecation 
of  the  factory  and  the  grounds  belonging  to  it — property 


244 


The     German     Great    Banks 


on  which,  as  a  rule,  the  mortgage  banks  will  not  lend.250 
(We  may  disregard  here  the  comparatively  few  instances 
in  which  policies  or  securities  are  pledged.)  Even  where 
a  first  mortgage  is  offered,  which  is  not  always  the  case, 
the  granting  of  the  loan  is  not  entirely  unobjectionable. 
If  it  becomes  necessary  to  sell  at  auction  the  mortgaged 
property,  together  with  the  machinery,  at  a  time  when  it 
is  idle,  little  more  is  likely  to  be  realized  on  the  factory  and 
plant  than  the  value  of  the  material  and  the  generally  low 
common  value  of  the  ground.  In  any  event,  the  property 
which  serves  as  security  for  the  loan  does  not  represent 
the  same  value  to  every  future  purchaser. 

Credit  ultimately  secured  by  realty  (Realkredit)  may  be 
based  further  on  the  issue  by  the  industrial  corpora- 
tion of  interest-bearing  bonds  secured  by  mortgage.  The 
flotation  of  such  securities  is,  however,  justified  only  "in 
the  case  of  a  business  with  an  established  earning  power, 
which  is  independent  of  any  particular  management  that 
may  be  in  control  for  the  time  being".251 

Loans  based  on  bonds  not  secured  by  mortgage  represent 
of  course  nothing  more  than  credit  on  personal  security 
(Personalkredit) ,  and  if  no  security  of  any  kind  is  pledged, 
it  is  nothing  more  than  unsecured  personal  credit.  Such 
credit,  however,  should  be  granted  only  under  the  same 
conditions  under  which  commercial  loans  are  granted;  that 
is,  only  after  a  careful  investigation  of  the  trustworthiness 
and  efficiency  of  the  management,  the  earning  capacity  of 
the  business,  as  well  as  the  profitableness  and  general 
market  prospects  of  the  particular  branch  of  industry. 

(6)  Industrial  credit  secured  by  lien  on  realty  (Indus- 
trieller  Realkredit),  is  particularly  hazardous,  when  the 


245 


National    Monetary     Commission 

industrial  establishment  concerned  does  not  fall  within 
the  scope  of  operation  and  experience  of  the  creditor  bank 
or  of  its  branches.  In  such  cases  the  investigation  into 
the  underlying  security  of  the  loan  can  not  be  made  with 
an  adequate  technical  knowledge  of  the  business  and  the 
lack  of  it  will  cause  losses  much  sooner  and  in  larger 
amount  than  in  the  field  of  commercial  credit. 

(c)  Having  failed  to  give  sufficient  attention  to  the 
above-mentioned  conditions  under  which  industrial  credit 
may  be  given,  the  creditor  bank  is  very  frequently  obliged  to 
urge  or  bring  about  the  reorganization  of  an  establishment 
as  a  stock  company  in  case  the  latter  has  not  yet  assumed 
that  form.  This  involves  risk  for  both  parties,  particu- 
larly when  the  change  to  the  corporate  form  is  to  be  made 
in  the  face  of  conditions  which  may  unfavorably  affect 
the  market  for  the  stock  and  bonds  to  be  issued.  Such 
conditions  are  the  presence  of  strong  or  even  over- 
whelming competition  on  the  part  of  other  corporations 
in  the  same  line  of  business,  the  general,  political,  or  eco- 
nomic situation,  the  immediate  industrial  outlook  in  the 
trade,  or  the  character  of  the  management.  Very  often 
the  expediency,  from  the  business  point  of  view,  of  trans- 
forming a  firm  into  a  corporation  does  not  receive  suf- 
ficient attention  in  case  of  enforced  reorganizations 
effected  for  the  purpose  of  mobilizing  long-term  loans,  or 
short-time  credit  which  has  gradually  been  diverted  from 
temporary  to  capital  outlays,  contrary  to  the  wishes  of 
both  parties,  or,  at  least,  of  the  lender;  even  less  thought 
is  given  in  such  cases  to  the  earning  power  of  the  future 
corporate  enterprise,  which  is  bound  to  be  affected  by  the 


246 


The     German     Great    Banks 

increased  expense,  or  to  the  question  whether  the  enterprise 
is  at  all  adapted  to  the  corporate  form  of  organization. 

Where  the  main  consideration  in  the  formation  of  a  stock 
company  is  the  necessity  of  mobilizing  a  loan  and  liqui- 
dating or  shifting  it,  the  situation  is  particularly  dangerous 
for  the  lender.  On  the  one  hand,  the  bank  may  be  obliged 
to  carry  the  newly  issued  stock  and  bonds  for  a  long  time, 
which  will  diminish  its  power  to  realize  quickly  on  its 
assets  and  interfere  with  its  freedom  of  action.  On  the 
other  hand,  if  it  succeeds  in  floating  the  securities  it  may 
impair  seriously  or  even  permanently  its  ability  to  float 
future  issues  (Emissionskr edit) .  The  same  objections  are 
present,  though  not  with  the  same  force,  whenever  a  bank, 
for  the  purpose  of  mobilizing  a  long-term  or  standing  loan, 
is  obliged  to  urge  or  assist  an  existing  corporation  in  the 
increase  of  its  capital  stock  or  in  the  issue  of  additional 
bonds,  since  in  this  case  as  well  the  bank  is  obliged  to 
market  the  securities  without  much  delay. 

On  the  other  hand,  there  certainly  were  many  cases  of 
industrial  enterprises  that  developed  slowly  and  gradually 
and  by  the  judicious  aid  of  long-term  loans  reached  a  point 
where  the  condition  of  the  enterprise,  the  prospective 
earning  power  of  the  additional  plant  or  improvements, 
and  the  general  industrial  situation  afforded  sufficient 
evidence  that  the  organization  of  a  stock  company  or  the 
issue  of  new  stock  or  bonds  was  desirable  and  feasible.252 
In  the  meantime  such  an  establishment  can  obtain  the 
funds  it  may  need  in  the  shape  of  acceptance  credit  paying 
interest  on  no  more  capital  than  has  actually  gone  into 
new  construction  or  improvements. 


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National    Monetary     Commission 

3.  Under  existing  requirements  for  admission  to  the 
exchanges  in  Berlin,  Hamburg,  and  Frankfort-on-the-Main 
industrial  securities  to  be  listed,  must  be  in  issues  having 
a  minimum  par  value  of  1,000,000  marks  ($250,000).  On 
the  smaller  exchanges  it  is  sufficient  that  the  issues  have 
a  par  value  of  500,000  marks.  As  a  result  small  concerns 
may  often  be  obliged  to  dispose  of  their  bonds  among  local 
circles  merely  without  listing  them  on  any  exchange,  which 
is  often  a  difficult  task,  or  else  they  may  be  forced  to  have 
recourse  to  short- time  credit,  which  is  not  adapted  to  their 
needs,  or  even  to  get  along  without  credit.  The  latter  con- 
tingency would,  of  course,  happen  only  in  case  the  provin- 
cial banks  or  bankers  failed  to  lend  their  assistance. 

Upon  careful  study  of  these  considerations  we  must  ad- 
mit that  the  central  institution  proposed  by  Hecht  may 
prove  beneficial  in  many  ways.  Hecht's  view  is  that  such 
a  special  institution  would  not  prove  a  serious  competitor 
to  the  credit  banks,  but  would  on  the  contrary  develop 
a. field  of  usefulness  of  its  own  which  would  supplement 
their  work  in  many  ways.  This  is  hardly  correct,  at  least 
not  so  far  as  moderate-sized  industrial  establishments  are 
concerned. 

On  the  other  hand  we  can  not  admit  the  necessity  of  such 
a  central  institution.  During  the  next  decades  great  prog- 
ress will  undoubtedly  be  made  among  the  credit  banks  in 
the  direction  of  the  organic  development  of  long-term  in- 
dustrial credit,  which  Hecht  found  wanting.  He  himself, 
referring  to  the  past,  emphasized  at  the  beginning  of  his 
monograph  the  fact  that  "  during  the  last  three  decades  the 
organization  of  credit  in  Germany  has  made  unexpected 
progress."  This  advance  in  my  opinion  has  occurred  and 

248 


The     German     Great    Banks 

will  continue  to  occur  not  only  in  the  field  of  commercial 
credit,  but  in  that  of  industrial  credit  as  well.253  This  is 
particularly  true  of  the  latter,  for  many  of  the  obstacles 
which  have  hitherto  stood  in  the  way  of  the  development 
and  organization  of  industrial  credit  are  of  a  general  char- 
acter, and  would  have  to  be  met  by  the  proposed  central 
institution  in  exactly  the  same  way  as  by  the  credit  banks, 
and  perhaps  under  far  greater  difficulties.  In  the  first 
place  such  an  institution  would  not  have  at  its  command 
the  experience  of  decades  and  the  far-reaching  connec- 
tions which  the  credit  banks  have.  The  credit  banks  will 
undoubtedly  be  in  a  position  to  avail  themselves  of  the 
same  experts  whom  the  central  institution  might  employ. 
This  applies  primarily  to  the  trust  and  auditing  companies 
which  the  banks  have  themselves  established,  and  is  at 
least  equally  true  of  those  other  organizations,  which, 
according  to  Hecht,  are  to  cooperate  with  the  central  insti- 
tution, like  the  federation  and  association  of  electrical 
engineers,  the  society  of  naval  engineers,  the  association  of 
German  gas  and  water  engineers,  the  association  of  Ger- 
man mechanical  and  railroad  engineers,  the  federation  of 
German  mechanical  engineers,  the  German  association  of 
mining  engineers,  and  the  association  of  German  chemists. 
In  many  important  points  the  central  institution  would, 
to  say  the  least,  have  no  advantages  over  the  credit 
banks  in  making  long-term  industrial  loans.  On  the 
other  hand  it"  would  be  sure  to  make  some  of  the  same 
mistakes  that  have  been  made  by  the  credit  banks,  and 
some  of  these  on  a  much  larger  scale.  If  perchance  it 
should  avoid  some  of  these  mistakes,  it  is  likely  to  com- 
mit other  mistakes  of  possibly  far  more  serious  conse- 
quences to  the  industrial  community. 


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National    Monetary     Commission 

To  begin  with,  it  is  evident  that  in  the  desire  to  find  a 
market  for  its  obligations  and  to  place  them  in  competi- 
tion with  existing  securities  it  would  have  to  make  every 
effort  to  show  large  and  continuous  dividends.254  It 
would  therefore  have  to  be  exceedingly  keen  for  business. 
As  a  result,  during  times  of  the  high  tide  of  prosperity  it 
is  likely  to  proffer  loans  unsolicited  or  to  thrust  funds 
upon  industrial  enterprises  more  often  than  was  the  case 
among  the  credit  banks.  Thus  the  abuse  charged  to 
the  credit  banks  will  prove  still  more  serious  in  its  effects 
on  general  industrial  conditions  and  might  lead  to  the 
lending  of  credit  to  establishments  which  would  never 
have  received  it  from  the  credit  banks. 

A  more  apparent  and  graver  danger  lies  in  this  that  a 
special  institution  of  this  character  can  by  no  means  be  as 
familiar  with  the  general  industrial  and  financial  condi- 
tions as  the  credit  banks.  And  yet,  in  granting  credit, 
this  factor  must  be  considered  just  as  carefully  as  the 
special  conditions  obtaining  in  the  industry  or  the  branch 
of  it  concerned  in  the  loan.  It  is  to  be  feared  that  the 
central  institution  will  not  take  the  general  business 
situation  into  consideration  or  will  fail  to  give  it  due 
weight. 

Among  the  reasons  assigned  to  prove  the  necessity 
for  establishing  a  special  institution  of  this  character  it 
is  urged  that  industrial  concerns  are  now  forced  by  the 
banks  to  resort  to  short-term  commercial  credit,  which 
is  not  adapted  to  their  needs.  As  against  this  conten- 
tion, it  may  be  asked  whether  the  effect  of  such  a  special 
institution  would  not  be  to  force  establishments  to  seek 
long-term  credit  for  purposes  for  which  only  short-term 


250 


The     German     Great    Banks 

loans  should  be  used,  as,  for  example,  for  the  purpose  of 
procuring  current  working  capital.  I  think  this  at  least 
possible,  and  I  am  convinced  that  Hecht's  charge  (unjust 
in  my  opinion)  of  the  "mechanical  standardization  of 
credit"  (Schablonisierung  des  Kr edits)  brought  against  the 
credit  banks  (see  his  "Memorial,"  p.  7)  is  likely  to  prove 
true  to  a  greater  extent  in  the  case  of  a  special  institution 
of  the  kind  proposed  than  it  ever  was  in  the  case  of  the 
credit  banks.255 

Again,  as  I  shall  show  later  in  the  course  of  this  book, 
a  special  institution  would  undoubtedly  introduce  new 
and  strong  competition  for  the  local  provincial  banks  and 
private  bankers  that  make  a  specialty  of  extending  credit 
to  the  small  and  moderate-sized  industrial  establishments 
(in  case  where  they  do  not  obtain  such  credit  from  the 
cooperative  societies) ,  particularly  credit  connected  with 
the  issue  of  sound  industrial  bonds  in  amounts  of  less 
than  1,000,000  marks  or  500,000  marks,  issues  too  small 
to  be  listed  and  dealt  in  on  the  exchanges  (seep.  248). 

Attention  is  also  called  to  another  point — the  impor- 
tance of  which  Hecht  by  no  means  underestimates — the 
need  of  having  the  underlying  conditions  for  industrial 
credit  investigated  by  persons  and  officers  located  where 
the  establishment  is  situated.  This  need  could  not  be 
met  by  such  a  central  institution  nearly  as  well  as  by 
our  large  banks  with  their  numerous  branches,  agencies, 
silent  partnerships  (Kommanditen) ,  deposit  banks,  and 
allied  institutions.  Not  having  affiliations  and  subsidiary 
institutions,  the  necessity  for  local  investigation  would 
oblige  the  central  institution  to  establish  gradually  all  over 
Germany  a  far  more  extensive  network  of  local  branches 


251 


National    Monetary     Commission 

than  those  established  or  ever  contemplated  by  the  credit 
banks.  The  desirability  of  such  a  step  is  very  doubtful, 
but  unless  this  were  done  the  facilities  of  the  central  insti- 
tution for  obtaining  accurate  information  and  carrying  on 
its  investigations  on  the  spot  would  be  inferior  to  those 
of  credit  banks. 

A  further  point  of  criticism  raised  by  the  Frankfurter 
Zeitung  of  September  16  and  25,  1908,  was  that  the  bonds 
which  it  was  proposed  to  issue  would  in  effect  have  all 
the  characteristics  of  bonds  payable  to  bearer,  without 
any  governmental  authorization  therefor  having  been 
given  or  even  requested.  Another  just  criticism  is  to  the 
effect  that  it  ought  to  be  shown  "that  the  loans  to  be 
made  with  the  proceeds  of  the  sale  of  securities  have 
back  of  them  sufficient  security  to  justify  people  to  invest 
their  savings  therein,"  before  "a  new  kind  of  obligation 
is  introduced,  which  would  shift  to  the  public  the  risk  of 
long-time  industrial  credit,  formerly  borne  directly  by  the 
lender."  It  is  contended  that  Hecht  has  not  proved  this 
point,  for  it  is  not  enough  to  refer  to  the  fact  that  the 
same  objection  was  raised  at  one  time  against  the  mort- 
gage banks.  The  conditions  are  entirely  different,  both 
on  account  of  the  difference  in  the  character  of  the  secu- 
rity, and  the  state  supervision  to  which  the  mortgage 
banks  are  subject,  and  the  complete  difference  in  legal 
status,  a  point  which  will  be  gone  into  further  below. 

To  this  I  may  add  the  following.  One  of  the  advan- 
tages claimed  for  the  central  institution  is  that  its  bonds 
would  be  issued  against  loans  of  the  most  varied  kinds,  and 
resting  on  different  kinds  of  security.  Should  this  indeed 
be  the  case,  and  were  the  prospectus  to  give  an  account  of 


252 


rn    7 


The     German     Great    Banks 

all  the  industrial  enterprises  concerned  and  in  all  the  details 
demanded  by  the  requirements  for  listing  the  securities, 
the  complexity  would  be  so  great  that  it  would  be  as  diffi- 
cult to  determine  the  real  value  of  the  bonds  as  to  ascer- 
tain the  actual  condition  of  the  central  institution  itself. 

Baron  von  Pechman  (op.  cit.,  p.  94)  has  properly  called 
attention  to  the  point  that  the  credit  to  be  given  by  the 
central  institution  would  prove  the  less  attractive  to  indus- 
trial concerns  the  shorter  the  period  of  amortization  to 
which  they  would  have  to  agree  besides  the  5  per  cent 
interest  and  a  high  commission.  And  yet  in  enumerating 
the  disadvantages  of  short-term  commercial  credit  for 
industry,  Hecht  lays  special  stress,  and  very  properly, 
on  its  costliness. 

Finally  it  must  not  be  forgotten  that  Hecht 's  project 
has  long  ago  been  realized  abroad,  even  though  only  in 
the  form  of  a  provincial  bank.  However,  that  is  the  form 
which  Hecht  himself  contemplated,  at  least  at  the  start. 
Now  this  foreign  bank  has  not  met  with  any  great  degree 
of  success. 

About  ten  years  ago  (1898)  a  special  institution  of  the 
kind  contemplated  by  Hecht  was  established  in  Austria — 
the  Bohemian  Industrial  Bank  (Bohmische  Industriebank) 
in  Prague — a  provincial  bank  with  the  moderate  capital 
of  12,000,000  kronen  ($2,436,000).  Of  late  (since  1906) 
it  has  had  as  one  of  its  special  purposes  the  flotation 
of  bonds  based  upon  industrial  loans  repayable  in 
annual  instalments.  Up  to  the  present  the  entire  volume 
of  its  bonds,  secured  by  mortgages,  had  not  exceeded 
16,639,000  kronen  ($3,378,000).  In  September,  1906,  it 
established  a  branch  in  Vienna,  entering  thus  into  direct 


253 


National    Monetary     Commission 

connection  with  the  money  market  of  Vienna.  Lopus- 
zanski,  secretary  to  the  Ministry  in  Vienna,  who  gives 
an  account  of  this  bank,256  withholds  final  judgment  as  to 
its  merits,  notwithstanding  the  reasonable  length  of  time 
the  institution  has  been  in  existence. 

Moreover  in  accordance  with  the  provisions  of  a  special 
enactment  in  Austria  of  December  27, 19O5,257  governing  the 
issue  by  the  banks  of  certificates  of  funded  indebtedness, 
three  large  institutions  were  given  the  privilege  of  issuing 
bank  bonds  (Reichsgesetz-Blatt  85.  Stuck,  Jahrg.  1905), 
based  on  industrial  loans  secured  by  mortgage.  The  lim- 
itation imposed  is  that  the  aggregate  amount  of  the  bonds 
must  not  exceed  the  total  amount  of  the  mortgages  on  the 
industrial  property  by  which  the  loans  are  secured.  The 
three  institutions  referred  to  are  the  Allgemeine  Primle- 
gierte  Oesterreichische  Bodenkreditanstalt,  the  Wiener  Bank- 
verein,  and'the  Zivnostenskd  Banka  in^Prague.  Of  these 
only  the  latter  began  to  issue  such  bonds  as  early  as  1908. 
Although  four  years  have  elapsed  since  the  law  was  enacted 
it  can  not  be  said  that  there  has  been  any  great  activity 
along  the  new  lines. 

I  do  not  believe  in  the  practicability  of  the  new  venture. 
In  view  of  our  conditions  in  Germany,  at  any  rate,  I 
would  not  advocate  the  adoption  of  a  law  which  would 
authorize  banks  to  issue  certificates  of  funded  indebtedness, 
particularly  as  no  great  use  of  such  a  privilege  is  likely  to 
be  made  in  Germany,  so  far  as  can  be  foreseen.  We  may 
recall  in  this  connection  that  the  issue  of  such  certificates 
of  funded  indebtedness  was  proposed  by  Pereire,  and  that 
provision  was  made  for  it  more  than  50  years  ago  in  the 
charter  of  the  Credit  Mobilier  and  of  the  Darmstadter 


254 


The     German     Great    Banks 

Bank.  Everybody  is  agreed  that  it  was  fortunate  that 
such  issues  were  never  made.  As  it  is,  the  concentration 
and  decentralization  of  the  banks  has  led  to  a  complexity 
and  obscurity  in  the  bank  statements  that  is  constantly 
increasing.  The  issue  of  certificates  of  funded  indebted- 
ness based  on  diverse  industrial  undertakings,  the  standing 
of  which  can  not  be  easily  found  out,  would  not  tend  to 
lessen  this  obscurity. 

Finally,  certain  weighty  objections  of  a  purely  legal 
nature  remain  to  be  discussed.258 

The  following  are  the  only  possible  forms  in  which  the 
bonds  might  be  issued: 

I.    BONDS    SECURED    BY    MORTGAGE.259 

i.  Supposing  the  central  institution  issues  its  own 
bonds,  two  cases  are  possible: 

(a)  In  consideration  of  a  loan  made  to  an  industrial 
establishment,  it  might  take  bonds  issued  by  the  latter 
(and  secured  by  mortgage)  made  out  to  the  central  insti- 
tution or  to  its  order.     On  the  basis  of  these  bonds  the 
central  institution  might  issue  its  own  bonds,  depositing 
with  a  trustee  as  security  the  bonds  of  the  establishment. 

(b)  Another  way  would  be  this:  The  establishment  issues 
bonds  secured  by  mortgage  in  favor  of  a  bank,  which 
would  make  the  loan  in  the  first  instance.     Against  these 
bonds  indorsed  by  the  bank  the  central  institution  would 
in  turn  issue  its  own  bonds. 

In  my  opinion  there  can  be  no  doubt  that,  inasmuch  as 
the  purpose  of  the  central  institution's  "activity"  is  "di- 
rected" 26°  exclusively  or  in  part  to  the  making  of  mortgage 
loans  on  the  real  estate  of  industrial  establishments  and  to 


255 


National    Monetary     Commission 

the  issue  of  bonds  on  the  basis  of  the  mortgages  acquired, 
the  institution  would  be  a  mortgage  bank  according  to  the 
wording,  meaning,  and  purpose  of  article  i  of  the  mortgage- 
bank  act  of  July  13,  1899.  As  such  it  must  obtain  a 
charter.  As  its  sphere  of  business  is  not  be  to  confined  to 
any  one  of  the  Federated  States,  it  must  obtain  its  charter 
from  the  federated  council  (Bundesrat).  This  being  so, 
the  central  institution  would  be  subject  to  the  limitations 
of  the  mortgage-bank  act.  In  this  respect  it  would  make 
no  difference  whether  the  mortgage  bonds  issued  by  the 
various  establishments  receiving  loans  were  bonds  secured 
by  a  specific  property  or  by  the  full  assets  of  the  institu- 
tions. These  considerations  apply  to  the  two  cases,  (a) 
and  (6) ,  because  article  i  of  the  mortgage-bank  act  applies 
equally,  no  matter  whether  the  mortgage  is  originally 
made  out  in  favor  of  the  central  institution  or  the  mort- 
gage is  obtained  by  the  central  institution  from  a  third 
party  (cf.  Komm.  Bericht.,  p.  i,  sec.  5;  par.  i,  No.  i,  ibid.). 

If  this  view  is  correct,  the  purpose  of  the  bank,  to  make 
loans  to  industrial  establishments  and  to  issue  bonds 
against  them,  would  in  these  most  important  cases  be 
almost  completely  nullified.  Even  if  we  follow  Ernest 
Sontag261  in  rejecting  Hecht's  interpretation262  of  section 
12,  paragraph  i,  clause  2,  of  the  mortgage-bank  act,  the 
policy  of  the  mortgage  banks,  as  shown  in  note  250, 
p.  827,  would  continue  unaltered,  according  to  which, 
with  few  exceptions,  no  loans  are  granted  on  industrial 
establishments . 

2.  Suppose  now  that  the  central  institution  does  not 
issue  its  own  bonds.  We  might  then  have  a  case  where 
the  bonds  secured  by  mortgage  would  be  issued  by  the 


2S6 


The     German     Great    Banks 

industrial  establishment  itself  to  the  order  of  the  central 
institution,  and  the  latter  would  no  more  than  indorse 
the  bonds.  It  would  make  itself  liable  for  them  in  the 
same  way  that  a  bank  assumes  liability  for  a  bill.283  In 
this  case  the  mortgage-bank  act  would  not  apply,  for  it 
would  not  involve  the  issue  of  bonds  by  the  central  insti- 
tution against  mortgage  loans  made  by  it  or  by  some 
other  party.  The  central  institution  would  be  acting 
only  as  an  intermediary,  guaranteeing  the  bonds  issued 
directly  by  the  various  establishments.  These  securities, 
to  be  sure,  would  gain  in  value  and  become  more  readily 
marketable,  for  the  reason  that  they  had  been  passed  on 
and  indorsed  by  the  central  institution,  but  scarcely 
more  than  the  industrial  bonds  floated  by  a  well-known 
bank. 

On  the  other  hand,  so  long  as  the  bonds  are  issued  by 
various  borrowers,  and  merely  indorsed  by  the  central  insti- 
tution, it  would  be  impossible  to  combine  and  treat  as  one 
aggregate  loan  of  i  million  marks  the  issues  of,  say,  four 
establishments  where  each  issue  was  for  250,000  marks. 
This  does  away  with  a  second  argument  advanced  in  favor 
of  the  creation  of  a  central  institution,  namely,  that  by 
combining  a  number  of  loans  it  would  enable  the  securities 
of  smaller  establishments  whose  bond  issues  were  for  less 
than  1,000,000  marks  to  be  listed  and  dealt  in  on  the 
exchanges. 

II.    BONDS   NOT   SECURED   BY   MORTGAGE. 

It  might  be  thought  that  this  difficulty  could  be  obvi- 
ated in  the  following  manner:  The  central  institution 
would  have  the  four  establishments  each  issue  in  its  favor 

90311° — ii 18  257 


National    Monetary     Commission 

bonds  for  250,000  marks,  unsecured  by  mortgage.  The 
institution  might  then  in  turn  deposit  these  bonds  with  a 
trustee,  and  issue  against  them  its  own  bonds  to  the 
amount  of  1,000,000  marks.  These  could  then  be  listed 
and  traded  in.  The  objection  against  this  plan,  however, 
is  that,  if  one  of  these  establishments  should  become  bank- 
rupt, the  claim  based  on  these  bonds  would  entitle  the 
central  institution  to  no  greater  a  share  in  the  assets  of  the 
bankrupt  firm  than  would  fall  to  the  other  non-preferred 
creditors  of  the  establishment.  In  other  words,  if  the 
industrial  establishment  becomes  insolvent,  the  claims 
arising  from  the  bonds  which  it  has  issued  and  pledged 
with  the  central  institution  are  on  a  par  with  all  other 
non-preferred  claims  against  the  establishment.  There 
would  thus  be  little  inducement  to  the  public  to  purchase 
such  bonds,  even  if  these  should  be  admitted  to  the  ex- 
change, which  is  doubtful.  Should  they  be  listed,  it  seems 
to  me  that  the  exchange  accepting  them  would  at  least 
insist  that,  inasmuch  as  it  might  be  erroneously  assumed 
from  the  fact  that  the  bonds  were  pledged  to  the  central 
institution  that  they  were  secured  by  a  preferred  lien  on 
the  property  (dingliche  Sicherheit) ,  the  absence  of  it  should 
be  expressly  stated  in  the  prospectus.  This  would,  of 
course,  spoil  the  market  for  such  securities. 

The  outcome  of  these  legal  considerations  is  as  follows: 
i.  In  the  case  of  an  issue  of  mortgage  bonds,  the  cen- 
tral institution,  as  such,  could  be  active  only  in  the  case 
described  under  I  2.  Here,  however,  it  would  serve  pri- 
marily only  the  interests  of  the  larger  establishments. 
These  are,  as  a  rule,  closely  connected  with  the  banks,  and 


258 


The     German     Great    Banks 

have  hitherto  received  too  much  rather  than  too  little 
credit. 

2.  As  regards  the  issue  of  bonds  without  mortgage 
security  there  is  no  real  necessity  for  adding  further  to  a 
class  of  bonds  which,  contrary  to  what  the  purchaser 
generally  believes,  do  not  confer  upon  him  any  right  of 
lien  on  the  property  (dingliches  Recht) ,  the  more  so  that 
it  would  be  of  no  benefit  to  the  small  trader  as  such. 

3.  To  allow  the  issue  of  bonds  in  cases  I  No.  i  a  and  b, 
there  would  be  need  for  amending  existing  legislation  in 
order  to  enable  the  central  institution  to  avoid  the  neces- 
sity of  obtaining  a  charter  as  a  mortgage  bank.    In  view 
of  the  existing  superabundance  of  industrial  bonds,  there 
is  no  adequate  justification  for  such  amendment. 

Should  the  central  institution  enter  upon  a  career  as 
such,  in  spite  of  all  the  existing  economic  and  legal  objec- 
tions, it  can  not,  in  my  opinion,  look  forward  to  a  rapid 
or  notably  successful  activity. 


(B)    THE   CURRENT  ACCOUNT   BUSINESS.264 

Current  account  transactions  between  the  bank  and  its  ^  o 


*« 

clients  are  one  of  the  main  sources  of  the  commissions 
earned  by  the  bank  in  the  general  course  of  business.  At  *  \  ^  . 

• •  '          •  "•'        '    '*     " — '        "         '  '    "'          '  •   •••     '     i^ m^~mm    i  IM.PT  -tf-xV^ 

the  same  time  the  current  account  is  the  basis  for  the "^fs 

C,/          pv 

various  relations  by  which  both  parties   are  gradually  fc;   ^^ 

.  ..         i     .      .  ^._.  **kf     •*•• 

drawn  into  closer  union.     Through  the  current  account^/.  *<•«£ 

#  ^v- 
the  bank  serves  in  the  first  place  in  the  capacity  of  "  maid  ' 

of  all  work"  in  the  business  household  of  its  customers, 
performing  a  thousand  and  one  services  each  for  a  small 
consideration.  This  menial  position,  as  a  rule,  is,  how- 
ever, only  a  temporary  stepping  stone  in  its  progress  to 


259 


National    Monetary     Commission 

a  position  of  influence,  at  times  even  of  dominance,  and 
one  offering  great  advantages  of  the  most  diverse  kinds. 

For  this  reason  the  current  account  more  than  any 
other  branch  of  business  represents  the  field  in  which  the 
various  banks  fight  their  competitive  battles,  particularly 
the  battle  for  the  industrial  clientele.  Once  regular  rela- 
tions are  established  through  the  current  account,  a  direct 
road  is  opened  to  power  and  profit  for  the  bank.  This 
road  leads  past  the  various  forms  of  loans,  which  of  them- 
selves, especially  the  right  to  close  the  account,  give  a 
certain  amount  of  influence  to  the  bank.  It  leads  further 
to  increased  power  and  profit  through  reorganizations, 
promotions,  flotations  of  securities,  consolidations  and  per- 
manent participations  in  industrial  undertakings  through 
stock  ownership,  or  representation  on  the  supervisory 
board,  or  both.  Through  these  transactions  it  leads  to 
the  conquest  of  entire  branches  of  industrial  activity,  to 
close  affiliation  with  commanding  industrial  concerns, 
cartels,  and  syndicates,  and  marks  the  beginning  of  the 
supremacy  of  groups  of  banks. 

In  the  systematic  development  of  the  current  account 
business  in  industrial  districts,  attained  only  gradually, 
and  after  much  labor  and  trouble,  we  see  at  the  same  time 
a  powerful  lever  in  the  systematic  industrial  policy  of  the 
banks.  The  successful  carrying  out  of  this  policy  tends 
also  to  establish,  strengthen,  and  extend  the  supremacy  of 
the  banks  over  the  private  banking  houses  usually  found 
in  this  field. 

The  essential  features  of  the  current  account  business 
are  the  following : 


260 


The     German     Great    Banks 

In  the  course  of  the  current  account  transactions,  the 
German  credit  banks  first  of  all  provide  their  customers 
with  the  facilities  for  making  and  receiving  payments 
(Zahlungsverkehr).  They  receive  payments,  and  make 
payments  on  their  account,  collect  their  bills,  interest  on 
mortgages,  and  claims.  For  such  of  their  customers  espe- 
cially as  are  engaged  in  foreign  and  over-sea  trade,  they 
draw  bills,  checks,  drafts,  and  letters  of  credit.  By  putting 
their  signature  to  the  commercial  paper  of  their  customers 
they  convert  this  paper  into  safe  securities,  negotiable 
everywhere.265  They  accept  bills  drawn  upon  them  by 
their  customers  or  clients  of  the  latter.  They  place  at  the 
disposal  of  their  customers  the  transfer  facilities  (Girouer- 
kehr)  provided  by  the  bank,  its  branch  offices  and  affiliated 
banks,  though  this  need  is  but  seldom  felt,  in  view  of  the 
giro  facilities  offered  by  the  Reichsbank. 

They  also  provide  foreign  bills  of  exchange  for  such  of 
their  customers  as  need  them  for  their  foreign  trade 
transactions.  These  have  retained  the  character  of 
instruments  of  payments  to  a  far  greater  extent  than 
the  domestic  bills.  These  foreign  bills  are  held  by  the 
German  credit  banks  not  only  for  the  convenience  of 
their  customers,  but  also  to  maintain  the  liquidity  of 
their  own  assets.  They  keep  them  in  their  portfolios  not 
indeed  to  the  same  extent  as  the  Reichsbank,  but  never- 
theless in  considerable  amounts  in  order  to  be  in  a  position 
to  draw  gold  from  abroad,  in  case  of  a  money  stringency 
or  a  panic.  The  amount  of  foreign  bills  is  seldom  reported 
in  the  statements  of  the  German  banks.  The  annual 
report  of  the  Dresdner  Bank  for  1908  states  that  out  of 
a  total  in  bills  of  248,666,816  marks  (in  64,951  bills)  on 


261 


National    Monetary     Commission 

December  31,  1908,  there  were  bills  in  foreign  currency 
to  the  actual  value  of  24,999,370  marks.  In  the  same  way 
the  Disconto-Gesellschaft  reports  that  on  the  same  date, 
out  of  a  total  of  158,928,057  marks  held  in  bills,  there 
were  foreign  bills  to  the  value  of  18,347,484  marks.  In 
1903  more  than  half  (54.5  per  cent)  of  the  bill  portfolio 
of  the  Berliner  Handelsgesellschaft  was  made  up  of 
foreign  bills. 

To  meet  the  wants  of  their  customers,  the  German 
credit  banks  furnish  surety  bills  (Wechsel-Avale)  for 
their  customers,  more  particularly  in  favor  of  the  customs 
and  railroad  authorities  to  guarantee  the  payment  of 
customs  duties  and  railroad  freight  charges,  on  which 
deferred  payment  has  been  allowed.266 

They  also  undertake  to  collect  foreign  and  domestic 
bills,  deducting  their  expense  and  commission.  However, 
under  the  terms  of  the  current  account,  which  are  nearly 
always  identical  on  this  point,  they  do  not  assume 
responsibility  in  the  case  of  foreign  bills  or  bills  on  smaller 
places  in  Germany,  for  presenting  them  on  time,  or  for 
having  them  protested.  At  the  request  of  their  customers 
they  make  remittances  by  telegraph  in  order  to  meet 
outstanding  obligations  in  foreign  countries. 

In  their  current  account  transactions  they  reduce,  for 
their  customers,  the  risks  arising  from  export  and  import 
trade  by  discounting  or  loaning  on  the  bills  drawn  by  the 
exporter  upon  foreign  purchasers.  They  allow  the  im- 
porter credit  against  which  the  foreign  merchant  may 
draw,  and,  on  the  delivery  of  the  bill  of  lading,  they  put 
their  acceptance  on  the  bills  of  the  foreign  seller  to  the 
amount  of  the  invoice,  thus  making  it  possible  for  these 
bills  to  be  discounted. 

262 


The     German     Great    Banks 


They  allow  their  customers  credit  on  current  account 
for  a  considerable  period  of  time,  or  they  give  them 
short-time  credit  on  current  account  or  independently 
of  it,  by  discounting  the  bills  of  their  customers  or  their 
clients,  or  by  granting  them  loans  on  collateral  or  hi  the 
shape  of  the  so-called  reports.  In  a  few  instances, 
following  the  example  of  the  Deutsche  Bank,  they  have 
begun  lately  to  discount  for  their  customers  even  out- 
standing business  accounts. 

They  accept  securities  and  documents  of  their  custom- 
ers for  safe-keeping  in  their  vaults,  as  a  rule  gratuitously 
in  case  a  commission  is  paid  on  transactions  on  current 
account.  In  case  they  undertake  at  the  same  time  to 
look  after  these  securities,  they  charge  an  exceedingly 
small  commission  for  this  service. 

Under  the  latter  head  we  have  the  following  operations : 
The  cashing  of  coupons  as  they  become  due  and  the  pre- 
senting for  payment  of  bonds  drawn  by  lot,  or  repayable 
for  other  reasons;  the  collection  of  mortgages  and  tem- 
porary interest  (Genussscheine)  the  drawing  of  incomes 
(Geltendmachung  vonBezugsrechteri) ;  the  exchanging  of  con- 
verted securities  or  the  presenting  of  such  securities  for 
stamping,  in  compliance  with  legal  requirements.  In  the 
case  of  a  reduction  of  capital  they  deposit  the  securities 
of  their  customers  either  for  stamping  or  cancellation. 
They  further  secure  new  sheets  of  coupons  with  the  talon 
(or  certificate  of  renewal),  they  supervise  the  drawings 
(with  certain  reservations),  they  make  additional  pay- 
ments on  securities  not  fully  paid  up,  they  pay  assess- 
ments on  mining  stock,  advance  cash  for  coupons  payable 
in  terms  of  foreign  money,  etc. 

263 


National    Monetary     Commission 

In  accordance  with  their  general  and  current  account 
regulations,  the  German  great  credit  banks  require  a 
special  order  of  the  depositor  of  securities,  in  case  of 
conversions,  insurance,  giving  notice  in  the  name  of 
stockholders  before  the  general  meeting;267  also  in  case 
of  instalment  payments  on  account  of  securities  not 
fully  paid,  of  assessments  on  account  of  mining  stock, 
and  in  case  of  reductions  of  capital  when  an  exchange  of 
stock  for  a  smaller  amount  of  new  stock  is  to  be  made 
(Zusammenlegung  von  Aktieri). 

According  to  Waldemar  Muller,268  the  Dresdner  Bank 
alone  manages  securities  of  customers  aggregating  in 
value  to  nearly  2,000,000,000  marks,  not  counting  the 
securities  held  by  its  deposit  offices.  The  German  credit 
banks  or  their  deposit  branches  and  exchange  offices 
(Wechselstuben)  take  care  of  sealed  deposits  in  special 
fire-  and  burglar-proof  boxes  and  vaults,  with  keys  held 
by  the  bank  and  by  the  respective  depositors,  a  function 
performed  abroad,  and  particularly  in  England  and  Amer- 
ica, by  special  safe-deposit  companies. 

In  accordance  with  special  rules  German  credit  banks 
buy  and  sell  securities  on  commission  and  make  loans 
thereon,  according  to  terms  described  more  fully  below, 
which  are  essentially  the  same  for  all  the  large  banks. 
Ivoans  on  mining  stock,  where  they  are  not  completely 
barred,  and  on  American  railroad  shares,  are  as  a  rule 
subject  to  special  agreements. 

Customers  having  a  current  account  with  the  credit  banks 

may,  if  they  wish  it,  open  a  check  account.     Balances  on 

\  such  accounts  do  not  bear  interest.     On  the  other  hand, 

\  the  bank  charges  no  commission  on  the  turnover  of  such 

264 


The     German     Great    B 


a  n 


accounts.  An  accounting  is  rendered  usually  each  quar- 
ter. Deposits  of  cash  to  this  account,  if  made  before  12 
o'clock,  are  credited  as  of  the  date  of  deposit  or  the  next 
business  day;  when  made  later,  they  are  credited  as  of 
the  business  day  next  following.  Cash  paid  out  on  this 
account  is  charged  to  the  day  on  which  it  is  paid.269 

German  credit  banks,  mainly  through  their  exchange 
offices  and  deposit  branches,  frequently  act  as  interme- 
diaries for  their  customers   in  securing  for  them  mort- 
gage  loans,    and   often   obtain   for   them   or   lend   them.}— 
directly  money  for  building  purposes.     They  make  them- l 
selves  responsible  either  in  the  form  of  surety  or  of  de- 
posit of  so-called  "Aval-bills"  to  the  customs  or  rail- 
road authorities  for  the  payment  of  customs  duties  or 
freight  charges,  where  credit  has  been  allowed  to  theirf""""" 
customers;  or  for  the  proper  fulfillment  on  time  of  con- 
tracts entered  upon  by  their  clients  for  supplies  or  work. 
At  the  wish  of  their  customers  and  on  payment  of  a 
moderate  fee  they  insure  securities  left  with  them  for 
deposit  and  care  against  reduction  in  value  in  case  of 
drawings. 

They  finance  the  reorganization  into  stock  companies 
of  business  firms  in  which  their  customers  are  interested; 
also  the  organization  of  new  stock  companies.  They 
underwrite  the  issue  of  newly  created  shares  and  bonds 
in  a  great  variety  of  forms  and  on  the  most  diverse  terms. 

Finally,  they  supply  or  secure  for  their  clients  necessary 
or  helpful  information  regarding  new  business  connections 
which  the  latter  may  be  contemplating  and  on  the  stand- 
ing of  individuals  or  firms  to  whom  credit  is  to  be  extended, 
also  on  foreign  connections  and  markets.  They  grant  or 

265 


National    Monetary     Commission 

obtain  for  their  customers  various  advantages  and  facilities, 
both  in  their  commercial  relations  and  in  their  mutual 
intercourse,  and  notably  in  connection  with  the  flotation 
of  securities. 

As  a  result  of  the  mutual  competition  of  the  banks, 
commissions  on  German  current-account  transactions 
have  to-day  fallen  to  a  level  lower  than  ever.  This  is 
very  deplorable,  for  it  may  lead  to  the  neglect  of  what  is 
the  mainspring  of  the  banking  business,  the  current- 
account  transactions,  and  to  the  preferment  of  other 
more  speculative  branches  of  banking.  A  point  has  been 
reached  where  a  great  many  services  for  which  a  charge  is 
made  abroad  are  performed  in  Germany  gratuitously, 
and  the  commissions,  where  paid,  are  so  slight  that  often 
they  do  not  cover  even  in  part  the  share  of  the  general 
expense  which  these  services  involve.  Thus  as  a  rule  the 
commission  for  the  business  done  on  current  account  is  fig- 
ured on  the  larger  side  of  the  account,  being  one-half  of  i 
per  mille  for  bankers  and  i  per  mille  for  others.  For  bill 
acceptances  the  commission  is  one-fourth  of  i  per  cent  per 
quarter.  As  a  rule  this  charge  is  remitted  by  most  large 
banks  in  the  case  of  their  regular  customers,  who  are 
allowed  to  issue  time  drafts  on  the  bank.  It  is  exacted 
only  when  they  have  no  adequate  funds  on  deposit  in  the 
bank  on  the  day  when  the  acceptance  is  made.270 

In  the  absence  of  a  special  understanding,  interest  is 
allowed  on  credit  balances  normally  at  a  rate  i  per  cent 
below  the  Reichsbank  discount  rate,  and  charged  on  debit 
balances  at  i  per  cent  above  the  Reichsbank  discount  rate. 
Usually,  however,  provision  is  made  for  a  maximum  rate 
in  the  one  case  and  a  minimum  rate  in  the  other. 


266 


The     German     Great    Banks 

Payments  on  current  account  are  usually  credited  as  of 
the  same  day  or  as  of  the  next  business  day  when  they  are 
made  after  4  o'clock.  Money  paid  out  is  always  charged 
as  of  the  day  on  which  the  payment  is  made.  Bills 
collected  are  entered  according  to  special  agreement, 
bills  discounted  as  of  the  day  on  which  they  are  discounted. 

Where  the  debit  balance  on  current  account  against  a 
customer  is  not  merely  temporary  or  when  the  customer 
needs  credit  either  at  stated  periods  (seasonal  credit) ,  at 
irregular  intervals,  or  continuously,  terms  must  be  agreed 
upon  as  to  the  amount,  the  rate  of  interest,  the  security, 
the  commission  to  be  charged,  etc.  These  are  usually 
made  in  writing  and  mostly  as  soon  as  the  account  is 
opened. 

In  the  course  of  time  and  under  the  pressure  of  successive 
legislative  enactments  and  new  legal  requirements,  the 
banks  have  developed  fairly  uniform  forms  of  contracts 271 
for  their  "business  and  current  account  transactions." 
Naturally,  however,  reservations  are  made  in  regard  to 
special  terms  affecting  commission,  interest,  the  amount  of 
credit,  and  the  conditions  of  repayment. 

Credit  on  current  account  is  given  only  to  classes  of 
business  to  which  bank  credit  is  applicable,  and  is  either 
unsecured  (Blankokredit)  or  secured.  The  bank,  how- 
ever, seeks  always  to  find  security  against  the  risk  it 
assumes  in  the  character  and  extent  of  its  current  account 
transactions  and  in  the  differences  that  naturally  appear 
among  its  current  account  clients.  The  common  policy 
of  the  banks  is  to  have  as  nearly  as  possible  an  equilibrium 
between  the  amounts  it  must  provide  for  current  account 
customers  in  the  shape  of  advances  or  payments  and  the 

267 


National    Monetary     Commission 

active  balances  of  the  deposits  of  other  current  account 
customers,  as  well  as  deposits  expected  from  them.272 

Under  such  conditions,  comparatively  little  of  the  bank's 
own  capital  is  tied  up  in  current  accounts.  This  safe- 
guards the  bank's  ability  to  realize  quickly  on  its  assets 
and  secures  to  it  freedom  of  action.  While  this  favorable 
situation  is  not  present  every  year,  or  in  the  case  of  every 
bank,  yet,  on  the  whole,  and  on  the  average  for  a  number 
of  years,  the  condition  has  been  nearly  approximated  by 
the  great  German  banks. 

In  this  connection  Miiller 272  justly  says :  ' '  For  this  reason 
the  customers  most  highly  valued  are  those  who ,  requiring 
credit  during  the  buying  season,  not  only  repay  the  ad- 
vances during  the  selling  season,  but  in  addition  accumulate 
balances  to  their  credit.  This  is  true  of  a  large  number  of 
commercial  firms  and  of  many  branches  of  industry,  notably 
in  Berlin.  The  seasons  for  various  branches  of  business 
being  different,  a  large  bank  with  branches  and  connec- 
tions in  all  industrial  centers  of  Germany  enjoys  the 
advantage  of  a  proper  distribution  of  its  accounts  among 
all  branches  of  industry,  and  of  the  best  possible  adjust- 
ment of  credit  and  debit  accounts.  Moreover,  the  periodic 
covering  of  loans  exerts  a  reassuring  influence,  whereas 
loans  that  are  running  throughout  the  year  require 
greater  caution  and  constant  vigilance." 

The  magnitude  of  current  account  transactions  appears 
from  the  following:  At  the  end  of  1908  the  current 
accounts  in  the  Deutsche  Bank,  including  accounts  in  the 
deposit  branches  in  Berlin  and  its  suburbs,  numbered 
I7I>3°5-  At  the  end  of  1907  the  Dresdner  Bank  had 
31,631  current  account  customers  at  its  central  office  and 


268 


The     German     Great    Banks 

67,212  accounts  in  its  exchange  offices  (Wechselstuben) ,  or, 
in  all,  98,843.  At  the  end  of  1908  the  number  of  accounts 
at  the  central  office  had  risen  to  35,542. 

The  security  for  credit  on  current  account,  or  for  credit 
given  on  current  account  through  acceptance,  collateral 
loans,  or  bill  discounts,  consists  as  a  rule  of  shares,  bonds, 
merchandise,  bills,  or  the  outstanding  accounts  of  the 
borrower,  that  is,  of  claims  arising  from  the  sale  of  mer- 
chandise and  manufactures,  or  of  raw  materials,  half- 
finished  or  finished  products,  belonging  to  the  firm 
receiving  credit,  or  of  life-insurance  policies,  patents, 
mortgages,  dwelling  houses,  factories,  land,  or  sureties 
including  secondary  and  counter  sureties  (Nach-und 
Ruckburgschafteri)  and  the  like. 

Under  normal  conditions,  whenever  the  banks  exercise 
due  caution — and  most  of  them  do — it  may  be  shown  that 
it  is  not  the  secured  credit  on  current  account  but  the 
unsecured  credit  which  has  proved  the  safest. 

German  credit  banks  grant  unsecured  credit  (Blanko- 
kredit)  as  a  rule  only  after  a  study  of  the  financial  state- 
ment of  the  applicant  for  credit  and  a  thorough  investi- 
gation.^ his  trustworthiness,  his  financial  standing,  and 
his  business,  which  must  present  no  obscurities  to  the 
inquirer,  and  when  it  is  established  beyond  doubt  that, 
so  far  as  it  is  humanly  possible  to  foresee,  the  loan  will  be 
repaid  and  repaid  on  time.  This  practice  of  granting  un- 
secured credit  is  far  more  extensive  in  southern  and  cen- 
tral Germany  than  in  northern  Germany,  but  it  is  seldom 
granted  to  other  than  business  men,  at  least  not  in  consid- 
erable amounts, 


National    Monetary     Commission 

When  security  is  demanded  for  a  loan,  it  is  a  sign  of 
some  doubt  on  the  part  of  the  bank,  excepting  the  cases 
when  under  general  or  special  instructions  of  the  board  of 
supervisors  or  under  orders  from  the  central  office,  the 
executive  officers  of  the  bank  or  of  the  branch  are  forbidden 
to  make  any  unsecured  loans  or  to  make  them  beyond 
certain  amounts,  or  without  special  permission. 

Hence  the  demand  frequently  made  for  a  separation  in 
the  bank  statement  of  secured  and  unsecured  loans  can 
not  be  based  on  the  assumption  that  such  data  would 
indicate  to  what  extent  the  management  was  complying 
with  the  dictates  of  business  prudence  in  demanding 
security,  as  such  information  would  tell  nothing  regarding 
the  character  of  the  security — which  is  the  all  important 
thing. 

Although  mistakes  have  undoubtedly  been  made  in 
giving  unsecured  credit,274  the  mistakes  made  in  German 
banking  practice,  and  for  that  matter  also  in  the  practice 
of  foreign  banks,  in  the  lending  of  credit  may  be  traced, 
so  far  as  my  experience  goes,  far  less  frequently  to 
improper  unsecured  loans  than  to  the  facts  pointed  out 
in  our  ''introductory  considerations."  Among  these  have 
been  excessive  liberality  and  eagerness  in  lending  credit, 
the  giving  to  or  even  forcing  upon  establishments  of 
long-time  instead  of  short-time  credit,  violations  of  the 
principle,  which  should  always  be  observed,  of  distributing 
risks,  and,  under  the  head  of  secured  credit,  the  false  choice 
or  false  distribution  of  collateral — for  which,  however,  the 
competition  of  other  banks  may  often  be  responsible — 
accepting,  for  example,  as  security  second  mortgages,  mort- 
gages on  building  lots,  unlisted  or  highly  speculative  secu- 


270 


t    B 


e  r  m  a  n     Lr  r  e  a  t    nan 


rities,  or,  worst  of  all,  accepting  as  ''security"  shares 
and  bonds  of  the  company  which  was  seeking  credit.  A 
practice  equally  dangerous  is  the  accepting  of  securities 
as  collateral  at  prices  manifestly  far  higher  than  what  they 
might  be  expected  to  bring  at  forced  sale,  and  the  like. 

I  believe  therefore  that  in  general  fewer  dangers  for 
the  bank  are  involved  in  unsecured  credit  than  in  secured 
credit.  The  most  questionable  secured  loans  are  those 
that  have  developed  out  of  original  unsecured  loans.275 

The  subject  of  unsecured  credit  arising  from  acceptances 
will  be  dealt  with  more  in  detail  further  on.  Such  credit 
is  subject  to  its  own  rules  and  considerations.  Satisfactory 
as  this  form  of  loan  may  be  to  a  bank  at  any  given  moment, 
it  can  not  be  denied  that  to  give  a  large  or  the  largest  part 
of  its  credit  to  customers,  in  the  form  of  acceptances,  may 
become  a  source  of  danger,  for  it  may  happen  that  just 
during  a  crisis  when  the  bank  needs  all  of  its  resources,  it 
may  be  called  upon  to  redeem  its  acceptances  owing  to 
the  inability  of  the  drawers  to  redeem  the  bills. 

The  current  account  business,  including  the  credit  given 
on  current  account,  presents  considerable  advantages  for  a 
credit  bank,  though  in  promoting  this  business  there  is 
need  of  the  utmost  attention  and  caution.  Once  devel- 
oped, however,  it  gradually  yields  regular  earnings,  which 
are  of  particular  help  during  adverse  times,  insuring  to  the 
bank  certain  minimum  dividends,  and  thereby  affording 
the  management  a  certain  repose  and  assurance  even  when 
the  more  speculative  branches  of  its  business  and  more 
particularly  the  flotation  of  securities  fail  to  bring  adequate 
returns. 


271 


National    Monetary     Commission 


While  it  is  true  that  the  stability  of  dividends  increases 
with  the  growth  of  the  deposit  business,  the  latter  in  its 
turn  is  influenced  by  an  extension  of  the  current  account 
business.  On  the  other  hand,  the  increase  of  dividends  is 
dependent  mainly  upon  the  expansion  of  the  current  busi- 
ness and  particularly  the  business  on  current  accounts. 

The  proportion  which  interest 27e  and  commissions  bear 
to  the  total  gross  profits  may  be  seen  from  the  following 
table.  So  far  as  commissions  are  concerned,  only  the 
smallest  part  is  due  to  transactions  on  current  account; 
by  far  the  larger  part  comes  from  the  banks'  brokerage 
business.  For  1908  the  profit  from  the  bill  business  is 
also  included.  The  percentages  are  as  follows: 


1906. 

1907. 

1908. 

Per  cew<t. 

Per  cent. 

Per  cent. 

Deutsche  Bank  

69 

73 

70.  6 

Disconto-Gesellschaft 

&4 

68 

61    4 

Dresdner  Bank  

79  , 

88 

84.8 

A.  Schaaff  ban  sen  'scher  Bankverein  

7*7  " 

88 

84.4 

Darmstadter  Bank 

55 

69 

66  6 

Berliner  Handelsgesellschaft  

73 

79 

82.  9 

-  7i 

96 

©-: 


Moreover,  since  a  regular  flow  of  business  on  current 
account  can  take  place  only  under  favorable  conditions  in 
trade  and  industry,  the  transactions  on  current  account 
give  the  credit  banks  an  excellent  insight  into  the  economic 
situation  as  it  presents  itself  at  any  moment.  At  the  same 
time  thejbank  thereby  develop^-a-ioJlQwing  of  customers 
who  are  able  to  take  over  the  securities  floated  by  it. 

Business  on  current  acciount  and  more  particularly 
industrial  loans  on  current  account  tend  to  promote  concen- 
tration.277 They  force  credit  banks  to  enter  into  close 


272 


The     German     Great    Banks 

alliance  with  the  old  and  established  provincial  banks  in 
the  industrial  sections — an  alliance  of  vital  importance  also 
to  the  latter.  This  was  in  fact  the  real  reason  for  the 
first  community  of  interests  effected — the  alliance  of  the 
Deutsche  Bank  with  the  Bergisch-Markische  Bank  and  the 
Schlesischer  Bankverein  in  1897.  Again,  the  provincial 
banks  and  private  bankers  must  gradually  lose  ground  in 
the  competitive  struggle  for  supplying  industrial  credit 
in  proportion  as  such  loans  increasingly  become  long- 
time loans,  which  force  the  lender  to  tie  up  large  sums 
for  an  indefinite  period  in  capital  loans  and  in  flota- 
tions of  securities  which  often  do  not  allow  of  immediate 
realization.  With  the  increasing  concentration  of  indus- 
try the  situation  becomes  more  acute,  as  increasingly 
larger  resources  are  required  for  industrial  development 
and  expansion. 

Finally,  industrial  loans  pave  the  way  for  the  employ- 
ment of  the  bank's  credit  in  the  reorganization  of  indus- 
trial establishments  on  a  corporate  basis,  or  the  flotation!  / 
of  new  securities  in  their  behalf.  Industrial  credit  thus 
naturally  ends  in  drawing  the  banks  into  closer  relations 
with  all  industrial  interests,  linking  the  credit  banks  with 
industry  in  a  well-nigh  indissoluble  union  for  weal  or  woe. 
This  union  finds  effective  and  visible  expression  both 
toward  outsiders  and  insiders  in  the  mutual  representa- 
tion on  the  supervisory  boards  by  the  leading  directors  on 
both  sides.278 

Similar  remarks  apply  to  commercial  credit  whenever 
used  merely  for  the  organization  of  corporations  or  the 
reorganization  of  firms  as  corporations  and  the  flotation 


90311°—  m ig  273 


National    Monetary     Commission 

of  securities.  This  has  been  the  case  in  not  a  few  instances, 
as  for  example  in  the  case  of  certain  navigation  concerns. 
The  following  data  for  different  years  in  the  second 
period  show  the  amount  of  loans  (Debitor  en),  in  the  main, 
though  not  exclusively,  loans  on  current  account,  for  all 
banks  (numbering  169  at  present)  having  a  capital  of  at 
least  i  ,000,000  marks  each ;  also  the  relation  which  these 
loans  bear  to  the  share  capital  of  the  credit  banks : 


Year. 

Number 
of  banks. 

Loans  (in 

1,000  marks). 

Capital  of 
banks  (in 
1,000  marks). 

Ratio  of 
loans  to 
capital. 

1881 

71 

886,360 

796   447 

Per  cent. 

1908                                                

169 

In  the  introductory  considerations  (p.  233  and  following) 
we  have  dealt  with  the  objections  and  criticisms  urged  on 
the  alleged  ground  that  the  loans  are  made  primarily 
in  an  altogether  one-sided  and  improper  manner  in  the 
interests  of  industry  (more  correctly  trade  and  industry). 

For  all  German  credit  banks  having  a  capital  stock  of  at 
least  1,000,000  marks  each,  the  total  assets  were  invested 
as  follows: 


Loans. 

Bills. 

At 

the  close  of  — 

i    Per  cent. 

Per  cent. 

1895  

So 

19 

1906 

1907  

1908  

(J2 

Thus  during  a  twelve-year  period  scarcely  any  change 
worth  mentioning  Ts  seen.  The  assets  of  the  great  banks 
were  placed  as  follows: 279 


274 


The     German     Great    Banks 


Loans. 

Bills. 

1906. 

1907. 

1908 

1906. 

1907. 

1908. 

Per  ct. 

Per  ct. 

Per  ct. 

Per  ct. 

Per  ct. 

Per  ct. 

Deutsche  Bank  

43 

40 

45 

29 

33 

29 

Disconto-Gesellschaft  

55 

59 

59 

20 

18 

18 

Dresdner  Bank 

Darmstadter  Bank  

55 

57 

48 

i7 

19 

22 

A.  Schaaffhausen'scher  Bankverein  

67 

68 

62 

ii 

8 

13 

Berliner  Handelsgesellschaft  .  . 

45 

41 

1  7 

28 

21 

Nationalbank  f  iir  Deutschland  

43 

45 

45 

19 

25 

18 

(C)    THE   ACCEPTANCE    BUSINESS. 

In  the  field  of  credit  there  are  essentially  three  kinds  of 
bank  acceptances  in  use  among  German  credit  banks. 

i .  In  the  first  place  we  have  the  acceptances  in  domestic 
and  foreign  commodity  transactions,  that  is  to  say, 
mercantile  acceptances  (Warenakzepte). 

We  shall  describe  in  another  place  the  use  of  accept- 
ances in  foreign  trade  and  the  difficulties  which  had  to  be 
overcome  before  German  bills  in  terms  of  marks  could  at- 
tain to  the  stage  of  approximate  equality  with  English 
pound  bills,  and  how  long  it  took  before  these  mark  bills, 
at  first  unknown  and  disliked  and  having  but  a  limited 
discount  market,  reached  the  point  where  they  are  no 
longer  subjected  everywhere  to  a  higher  rate  of  discount 
than  the  pound  bills  on  L,ondon. 

A  condition  in  which  business  men  support  rlirertly  the 
burden  of  credit  transactions  and  bear  unaided  the  risk 
involved  js  in  general  a  sign  that  industrial  organization 
is  as  yet  undeveloped.  This  is  the  situation  in  which 
products  and  commodities  are  sold  on  long  terms  by  the 
manufacturer  to  the  wholesaler,  or  by  the  latter  to  his 


275 


National    Monetary     Commission 

retail  customers,  the  seller  drawing  a  bill  on  his  customer 
(often  running  for  six  months),280  anticipating  the  matur- 
ity of  it,  by  discounting  the  long-time  claim  with  a  bank 
or  banker. 

For  a  long  time  this  was  the  exclusive  procedure  in 
Germany.  It  involves  on  the  one  hand  the  serious  disad- 
vantage that  the  entire  commercial  and  industrial  class 
becomes  accustomed  to  this  very  long  interval  for  loans 
and  payments,  often  of  six  months'  duration.  Like  an 
interminable  disease,  this  practice  affects  also  the  final 
link  in  the  commercial  chain,  the  trade  of  the  retailer  with 
his  customers.  On  the  other  hand  this  practice  imposes 
unusual  hardships  on  over-sea  trade  and  increases  its  cost. 
The  exporter  has  to  draw  on  his  foreign  customer  bills 
\  in  foreign  currency  for  the  latter's  acceptance.  Owing  to 
1  the  limited  market  for  such  notes,  he  finds  it  difficult  to 
discount  them,  and  has  to  pay  higher  rates  of  discount. 
In  addition,  he  has  to  bear  the  loss  resulting  from  fluctua- 
tions in  the  rate  of  foreign  exchange  which  may  take  place 
in  the  interval.281 

This  early  phase  in  the  development  of  industrial  or- 
ganization has  been  outlived  in  Germany,  at  least  to  the 
extent  that  for  some  time  past,  though  in  the  main  not 
before  the  present  period,  the  wholesale  trade  and  large 
industrial  concerns  no  longer  have  been  the  sole  and  direct 
grantors  of  credit,  having  as  a  rule  given  up  the  practice 
of  accepting  the  drafts  of  their  customers  or  of  drawing  on 
the  latter.  It  is  much  more  usual  for  the  German  whole- 
sale trade  and  the  large  industrial  establishments  to  draw 
upon  the  banks  or  bankers  with  whom  they  regularly  deal. 
^  The  bank;s  acceptance  is  then  remitted  to  the.  creditor, 

276 


The     German     Great    Banks 

or  arrangements   are  made  with  the  bank  whereby  the  \^ 
creditor  may  draw  directly  on  the  bank,  the  latter  accept- 
ing the  draft  which  is  then  discounted  by  the  drawer. 

This  practice  which  has  become  common  in  large-scale 
industry  and  the  wholesale  trade,282  whereby  the  imme- 
diate mercantile  bill  has  gradually  been  replaced  by  the 
bank  acceptance,  has  in  the  course  of  time  introduced  a 
certain  amount  of  improvement  in  the  direction  of  short- 
ening the  time  for  credit  and  payment  in  the  whole- 
sale trade  and  in  industry  conducted  on  a  large  scale. 
The  circumstance  which  has  done  most  to  bring  about 
this  change  is  that  only  two-  or  three-month  acceptances 
of  banks  and  banking  houses  whose  acceptances  are 
regarded  as  prime  discounts  (so-called  Privatdiskontos) , 
can  be  discounted  at  the  private  discount  rate. 

In  England,  according  to  the  account  of  Edgar  Jaffe,283 
considerable  advance  has  been  made  toward  dispensing 
with  mercantile  bills  altogether,  transactions  between  the 
large  firms  coming  more  and  more  to  be  on  a  cash  basis. 
This  third  stage  of  development  has  been  arrived  at  in 
Germany  only  by  the  large  cartels  and  syndicates  which 
may  be  thus  said  to  undertake  the  solution  of  an  impor-  * 
tant  economic  problem,  that  of  restricting  credit  transac- 
tions between  producers  and  their  customers. 

Thus,  for  example,  the  steel  works'  union,  as  stated  else- 
where (note  172,  p.  819)  reduced  the  terms  for  payment  on 
domestic  purchases  to  fifteen  days,  at  the^same  time  cut- 
ting down  to  a  large  degree  the  trs&Jr  discounts  allowed. 
To  foreign  dealers  trade  discounts  are  no  longer  given 
at  all. 


277 


National     Monetary     Commission 

The  large  German  banks  have  among  their  holdings  a 
very  large  number  of  bills  accepted  by  other  banks  (great 
banks  or  affiliated  banks)  and  discounted  or  rediscounted 
by  themselves.  These  bills  arise  from  the  above  de- 
scribed custom,  prevailing  among  the  wholesale  trade  and 
large  industrial  establishments,  to  draw  on  the  banks,  or 
to  make  special  arrangements  with  them  whereby  cus- 
tomers may  draw  on  the  banks,  the  latter  accepting  the 
bills  which  are  then  discounted.  Some  recent  writers 
who  advocate  the  strict  separation  of  "mercantile" 
from  ' '  finance ' '  bills  have  improperly  classed  the  above 
described  bills — true  mercantile  bills — among  the  finance 
bills,  on  the  ground  that  they  are  accepted  and  indorsed 
by  banks. 

The  following  is  a  good  illustration.  In  order  to  attract 
gold  to  America  from  abroad  in  1908,  deliveries  of  copper, 
cotton,  petroleum,  rice,  and  other  raw  materials  and  food- 
stuffs were  effected  much  more  quickly  than  usual  and  the 
equivalent  was  collected  much  more  promptly  by  drawing 
against  the  shipments.  As  a  result,  an  unusual  number  of 
legitimate  American  commercial  bills  were  drawn  on  the 
leading  German  banks  and  accepted  by  the  latter.  Other 
banks  were  glad  to  discount  this  paper.  Obviously  it 
would  be  wrong  to  follow  the  customary  tradition  and  call 
such  drafts  "  finance  bills  "  merely  because  they  were  issued 
with  the  manifest  purpose  of  attracting  gold,  or  to  go 
further  and  stigmatize  them  as  kite  flying  or  accommoda- 
tion paper,  as  was  frequently  done  at  that  time  and  up  to 
very  recently  in  Germany  as  well  as  in  England.  (See 
P-  213.) 


278 


kh  e  German  Great  Banks 
t  would  be  very  easy  to  multiply  examples.  They 
prove  that  the  term  "finance  bill"  may  often  be  a  misno- 
mer even  when  applied  to  bills  which  the  banks  are  instru- 
(  mental  in  circulating  by  their  acceptance  and  indorsement 
in  cases  where  the  purpose  of  the  bill  is  clearly  to  raise  money . 
It  would  follow,  from  what  has  been  stated  before,  that 
the  term  would  have  to  be  applied  to  most  bills  that  cir- 
culate in  Germany  at  the  present  time.  Thus  for  example, 
according  to  a  statement  made  before  the  bank  inquiry 
commission,  out  of  German  bills  to  the  amount  of  about 
400,000,000  marks  which  the  Deutsche  Bank  alone  held  in 
Berlin,  about  300,000,000  marks'  worth  consisted  of  accept- 
ances of  German  banks — a  situation  readily  understood  in 
view  of  the  foregoing  considerations. 

What  has  been  said  applies  not  only  to  bills  originating 
from  domestic  commercial  transactions,  but  perhaps  even 
more  so  to  commercial  paper  originating  from  oversea  \~~ 
commerce,  and  accepted  by  German  banks.  According  to 
the  statement  just  cited,  200,000,000  marks  of  paper  of 
this  class  had  been  accepted  by  the  Deutsche  Bank  alone. 

It  is  clear  from  the  foregoing  considerations  that  the 
greater  part  of  the  bank  acceptances  are  found  among  the 
bill  holdings  of  the  banks.  In  1907  bills  to  the  value  of 
2,621,630,000  marks  were  held  by  all  the  German  credit 
banks  having  a  capital  of  at  least  i  million  marks  each,  of 
which  acceptances  alone  amounted  to  2,035,  290,000  marks 
or  78  per  cent  of  the  total  bill  holdings.  It  may  therefore 
be  assumed  that  as  a  rule  between  70  and  75  per  cent  of 
the  entire  bill  holdings  of  German  credit  banks  are  made  — 
up  of  bank  acceptances,  a  conclusion  that  agrees  with  the  ' 
data  given  above. 


279 


National    Monetary     Commission 

Heiligenstadt  is  justly  of  the  opinion  that  in  order  to  be 
regarded  as  a  "legitimate"  bill,  as  distinguished  from  a 
finance  bill,  a  bill — i.  e.  every  claim  that  is  presented  in  the 
money  market  in  the  form  of  a  bill,  must  have  "as  its 
basis  an  economic  good  (Wirtschaftsgui) . "  I  should  dis- 
card entirely  the  expression  finance  bill  and  use  instead 
the  term  nominal  bill  (Leerwechsel) .  However,  the  point 
should  be  emphasized  that  this  "  economic  good  "  need  not 
necessarily  be  a  present  or  "concrete  good"  or  a  present 
or  concrete  commodity  transaction.  It  may  just  as  well 
be  an  advance  given  by  the  bank  to  domestic  or  foreign 
industrial  or  commercial  firms  with  the  view  of  future 
production  or  of  a  future  commodity  transaction. 

In  testifying  before  the  bank  inquiry  commission, 
Heiligenstadt  himself  pointed  out  another  case  where  even 
in  the  absence  of  such  a  loan,  a  bill  issued  would  not  be 
a  "finance  bill,"  still  less  a  "  nominal  bill."  Thus  a  mer- 
chant, manufacturer,  or  provincial  banker,  who  has  a  bal- 
ance to  his  credit  in  a  bank,  may  draw  a  bill  on  the  bank 
in  order  to  convert  this  deposit  into  a  form  most  liquid 
and  convenient  for  him.  Under  the  same  head  belong 
the  cases  mentioned  by  kotz.284  Thus  a  banking  house 
may  take  over  securities  from  a  debtor,  and  sell  them 
to  a  third  party.  It  may  then  draw  on  the  purchaser,  who 
may  in  turn  be  a  banking  firm.  Or  again,  in  taking  over 
a  loan,  a  bank  may  settle  for  it  with  its  acceptance.  As 
a  matter  of  fact,  in  both  of  these  instances  the  transaction 
involves  "as  much  the  circulation  of  a  commodity  pecu- 
liar to  this  branch  of  business  as  in  the  case  of  grain  or 
cotton  bills,"  although  all  these  bills  may  be  found  to  bear 
the  names  of  bankers  only.  It  would  be  impossible  to 


280 


The     German     Great    Banks 


deal  with  all  the  cases  belonging  under  this  head  with 
anything  approaching  completeness. 

In  view  of  the  foregoing  it  would  be  well  to  regard  as 
nominal  bills  only  such  long-  or  short-time  bills,  which  are 
not  based  on  present  or  future  production  or  on  present 
or  future  sales  of  commodities  in  industry,  agriculture 
or  trade,  or  are  not  drawn  with  a  view  to  liquidating 
credit  balances  resulting  either  from  these  transactions 
or  from  other  causes.  Neither  is  it  material  whether 
such  bills  have  been  accepted  or  issued  by  banks  or  by 
other  firms,  or  drawn  by  one  bank  on  another.  In  the 
case  of  long-time  bills,  however,  drawn  by  one  bank  on 
another,  or  on  private  bankers,  the  presumption  is  that 
they  are  nominal  bills. 

As.  a  matter  of  fact,  neither  the  Reichsbank  nor  any 
other  discount  bank  is  able  to  distinguish  a  "nominal 
bill"  of  this  kind  externally  from  a  " legitimate  bill"  any 
more  than  a  legitimate  stock-exchange  time-transaction 
can  be  distinguished  from  an  illegitimate  deal  of  the  same 
class.  Hence  there  will  always  be  cases  where  even  the 
most  expert  bill  broker  will  be  unable  to  tell  with  certainty 
what  kind  of  bill  he  is  handling. 

In  connection  with  the  expert  testimony  before  the  bank 
inquiry  commission,  two  members  of  the  commission, 
Heiligenstadt  and  Fischel,  pointed  out  cases  not  at  all 
rare,  which  show  particularly  well  how  little  the  banks  are 
able,  in  many  cases,  to  tell  the  true  character  of  a  bill  from 
the  instrument  itself,  which  may  often  come  to  them  from 
second  or  third  hands,  unless  they  know  the  character  of  the 
business  which  gave  rise  to  the  bill.  "Let  us  take  the  fol- 
lowing example:  A  spinner  imports  cotton  from  America 


281 


National    Monetary     Commission 

and  gives  his  acceptance  for  it.  He  spins  the  purchased 
cotton  into  yarn  in  two  weeks,  and  sells  and  delivers  the 
yarn  to  a  weaving  establishment,  drawing  on  the  latter 
for  the  goods.  The  weaving  concern  makes  it  into  cloth 
and  sells  the  woven  fabric  to  some  print  works,  drawing 
on  the  cotton  print  concern  for  the  goods  delivered. 
Here  we  have  three  bills,  each  of  which  must  according 
to  every  characteristic  be  classed  as  the  most  substantial 
bill  in  the  world;  and  yet  in  the  last  analysis  they  are 
based  only  on  a  single  commodity ' '  (Fischel) . 

As  a  matter  of  fact,  according  to  the  definition  we  have 
given  above,  we  could  not  characterize  any  of  the  above 
bills  as  a  "nominal"  bill.  The  phenomenon  in  question 
of  one  commodity  furnishing  the  economic  basis,  or  being 
the  " economic  good"  of  a  series  of  bills,  may  in  case  of  a 
boom  period  or  in  times  of  stress,  such  as  was  the  case  in 
America  in  1908,  be  intensified  by  the  feverish  hurrying 
of  the  processes  of  production  characteristic  of  such 
periods,  as  witnessed  likewise  in  our  own  electrical  and 
other  industries. 

Let  us  assume  that  in  consequence  of  such  acceleration 
a  process  that  normally  requires  three  months  is  crowded 
into  one  month.  At  the  expiration  of  three  months, 
instead  of  the  usual  one  bill  for  three  months  issued  by 
one  producer,  there  will  be  in  circulation  three  bills, 
drawn  at  the  successive  stages  of  the  process  of  production 
(by  the  producer  of  the  raw  material,  the  maker  of  the 
partly  finished  product,  and  the  manufacturer  of  the 
finished  goods).  This,  by  the  way,  is  one  of  the  reasons 
why  we  may  almost  always  observe  at  the  height  of  a 
boom  period  a  great  increase  in  the  number  of  bills  in 
circulation.285 


282 


The     German     Great    Banks 


2.  The  second  class  of  German  bank  acceptances  are  the 
industrial  acceptances  of  the  bank,  particularly  those  in- 
tended to  furnish  funds  for  the  following  purposes: 

(a)  To  provide  temporarily  for  current  operating  ex- 
penses, viz.,  for  salaries,  wages,  insurance  premiums,  the 
purchase  of  raw  material,  and  the  like,  purposes  for  which 
short- time  acceptance  credit  is  in  every  way  appropriate. 

(b)  To  provide  necessary  working  capital  not  merely  for 
temporary  needs.     As  a  rule,  for  this  purpose  long-time 
credit  should  be  resorted  to.     The  use  of  short-time  ac- 
ceptance  credit   in    such   a  case,   as  we  saw  above   (p. 
242),  involves  considerable  danger.     It  is  not  necessary 
to  dwell  here  on  both  these  points,  as  they  are  treated 
at  length  in  the  introductory  considerations  and  in  the 
discussion  of  Hecht's  proposal  of  a  central  institution  for 
long-time  industrial  credit.     What  I  wish  to  emphasize 
particularly  here  is  this:  The  volume  of  acceptances  of 
German  credit  banks  in  circulation  has  been  swelled,  to 
no  slight  extent  it  seems,  for  the  reason  that,  as  abundant 
experience  has  shown,  acceptance  credit,  when  granted 
for  other  purposes  than  that  of  supplying  temporary  defi- 
ciencies in  operating  funds,  is  often  not  repaid  at  maturity, 
but  extended, i.e., the  acceptance,  before  it  becomes  due, 
is  replaced  by  a  new  bill  issued  by  the  borrower  of  indus- 
trial credit.     This  bill  is  again  accepted  by  the  bank,  dis- 
counted, and  with  the  proceeds  the  old  acceptance  is 
taken  up. 

The  danger  involved  here  is  greater  for  the  reason  that 
this  form  of  granting  credit  is  particularly  attractive  to  the 
banks,  for  it  does  not  require  the  immediate  tying  up  of 
their  own  funds. 


283 


National    Monetary     Commission 

3.  The  third  category  of  German  bank  acceptances  oc- 
curs when  the  acceptance  credit  of  the  credit  banks  is  made 
use  of  by  bankers,  mainly  by  provincial  bankers,  to  finance 
their  own  stock  exchange  speculations  or  those  of  third 
parties  (so-called  speculative  acceptances — Spekulations- 
akzept)™ 

In  this  case  the  possible  consequences,  and  the  dangers 
involved,  are  the  same  as  those  described  under  2a,  where 
the  acceptance  credit  of  the  bank  is  granted  to  a  manufac- 
turer to  provide  needed  working  capital.  There  is  no 
doubt  that  throughout  the  second  period  the  use  by  bank- 
ers of  short-time  credit  on  the  strength  of  bank  accep- 
tances was  resorted  to  on  a  very  large  scale  and  to  an 
ever-increasing  extent,  partly  as  a  result  of  the  short- 
comings of  stock  exchange  legislation.  The  three-month 
acceptances  of  the  credit  banks  are  discounted  at  the 
private  discount  rate  and  the  proceeds  are  deposited  by 
the  bankers  in  the  bank  in  order  to  give  them  at  once  a 
balance  to  their  credit.  On  the  other  hand,  the  bankers 
are  debited  with  the  acceptance  only  as  per  date  of  its 
maturity.  In  this  way  the  bankers  attain  their  end  of 
getting  money  very  much  cheaper,  for  to  use  bank  credit 
in  another  form  would  cost  them  as  a  rule  i  per  cent  more 
than  the  official  bank  rate. 

In  so  far  as  this  practice  helps  to  meet  the  regular  and 
healthy  demands  of  investment,  there  can  surely  be  no 
objection.  The  procedure  becomes,  however,  objectionable 
from  the  point  of  view  of  the  general  economic  interests, 
when  it  promotes  extensive  speculation  and  overstraining 
of  the  stock  market  by  the  general  public.  There  can  be 
no  doubt  that  this  has  been  indeed  the  effect  to  a  large 
extent. 

284 


The     German     Great    Banks 


The  fact  is  that  for  a  long  time  past  one-third  of  the  if" 
loans  on  current  account  given  by  the  banks  has  almost  * 
regularly  been  in  the  form  of  acceptances.287 

For  all  the  German  credit  banks  having  a  capital  of  at 
least  1,000,000  marks  each,  the  ratio  between  total  loans 
and  acceptances  according  to  the  Deutscher  Oekonomist 
was  as  follows: 

[In  millions  of  marks.] 


Number 
of  banks. 

Loans,  in- 
cluding ac- 
ceptances. 

Accept- 
ances. 

Per  cent  of 
accept- 
ances in 
total  loans. 

At  the  close  of  — 

180^ 

94 

i  992 

706 

1896 

98 

2,  127 

752 

1897  

102 

2,351 

825 

35-  i 

1898  

108 

2,847 

984 

34-6 

116 

3    29S 

«  *53 

I9OO  

118 

3,  602 

,294 

35-9 

I9OI  

125 

3,356 

,136 

33-9 

•?     eCQ 

176 

1903  

124 

3,929 

,300 

33 

1904  

129 

4,396 

>  400 

33 

1905  

137 

5,238 

,601 

3° 

*43 

848 

1907  

158 

6,437 

,035 

33 

1908  

169 

6,605 

,891 

28 

For  all  the  great  Berlin  banks,  taken  in  the  aggregate,  - 
the  ratio  at  the  end  of  1909  was  33  per  cent;    at  the 
end  of  1907,  34.5  per  cent;  at  the  end  of  1908,  31  peiL____  ' 
cent.     For  the  individual  banks  this  ratio  was  as  follows : 


1906. 

1907. 

1908. 

Deutsche  Bank  

Per  cent. 
28 

Per  cent. 
34 

Per  cent. 
^28 

Disconto-Gesellschaft 

47 

,8 

Dresdner  Bank  
Darmstadter  Bank  

42 
24 

4® 

22 

37 

27 

Berliner  Handels-Gesellschaft  
A.  Schaaffhausen'scher  Bankverein  

34 
30 

41 
36 

39 

22 

National    Monetary     Commission 

The   amount   of   acceptances   of   the   six   Berlin  great 
banks  (includinj^tl^  at  the  end 

)f  each  year  was  as  follows: 

[In  million  marks.] 


Deutsche 
Bank. 

Dresdner 
Bank. 

Disconto- 
Gesell- 
schaft. 

Darm- 
stadter 
Bank. 

A.  Schaaff- 
hausen'- 
scherBank- 
verein. 

Berliner 
Handels- 
Gesell- 
schaft. 

At  the  end  of  — 

1895  

122 

75 

49 

41 

32 

41 

^S3fl-.  rr:..' 

116 

76 

44 

36 

33 

41 

1897  

130 

99 

47 

35 

31 

43 

1898  
1899 

128 

142 

117 

I  22 

53 
61 

34 

40 

46 

1900  

141 

131 

89 

_..  .,         37 

60 

56 

1901  

142 

IO4 

85 

3  7 

5  7 

62 

145 

I  14 

103 

54 

46 

1903         .  .  . 

1  80 

I  29 

IOI 

59 

49 

62 

1904  

185 

149 

142 

70 

81 

64 

1905  

197 

170 

162 

89 

82 

64 

1907  
1908 

264 
232 

209 

189 
109 

194 

78 
89 

149 

74 

Acceptance  credit  increased  almost  continuously,  nota- 
bly in  the  eighties  and  nineties,  even  as  compared  with  the 
capital  of  the  banks.288  On  this  point  reference  may  be 
made  to  the  table  printed  on  page  288.  The  differences 
as  compared  with  the  figures  reported  by  Ad.  Weber 
(Depositenbanken,  p.  117)  are  explained  by  the  fact  that 
in  this  table  surety  bills  (Avale)  furnished  by  the  banks, 
are  included  with  acceptances. 

Large  as  the  share  of  the  mercantile  acceptances  must 
have  been,  there  can  be  no  doubt  that  relatively,  as  well 

. 

as  absolutely,  a  very  large  proportion  of  the  total  accept- 
ance credit  given  by  bankers  in  this  period  was  made  up 
of  credit  in  the  form  of  industrial  acceptances  of  the 
doubtful  sort  described  under  2b,  and  of  the  no  less  doubt- 


286 


The     German     Great    Banks 

ful  "speculative"  acceptances  described  under  3.  Least 
objectionable  was  the  steady  and  by  no  means  slight 
increase  of  German  bank  acceptances  in  oversea  trade. 
Here  they  were  used  to  provide  reimbursement  for  ad- 
vances on  merchandise  in  transit,  the  bank  in  these  cases 
receiving  documentary  security,  viz,  bills  of  lading.  For 
the  Hamburg,  Bremen,  and  London  branches  of  the  great 
banks,  devoted  primarily  to  oversea  business,  a  regular 
correlation  can  be  traced  between  the  growth  of  that 
branch  of  business  and  the  growth  of  acceptances. 

A  diminution  in  speculative  acceptances  can  be  ex- 
pected only  as  a  result  of  self-education  in  the  banking 
profession.  This,  I  feel  sure,  will  be  effectively  aided  by 
the  voluntary  publication,  at  regular  intervals,  of  sum- 
mary balance  sheets.  In  my  opinion  the  view  that  credit 
in  the  form  of  acceptances  and  ' '  reports, ' '  could  be  made 
"subject  to  certain  rules"289  through  legislation  is  not 
tenable. 

The  table  printed  below  (p.  288) ,  shows  the  amount  of 
acceptances  for  the  eight  great  banks  of  Berlin  (the 
Commerz-  und  Disconto  Bank  and  the  Nationalbank  are 
added) ,  and  the  amount  of  the  acceptances  of  these  eight 
banks  relative  to  that  in  1883,  which  is  taken  as  100. 
It  also  shows  the  relation  of  acceptances  to  their  capital 
stock,  their  own  business  capital  (das  eigene  werbende 
Kapital,  capital  plus  surplus  funds)  and  finally  to  their 
entire  earning  resources  (das  gesammte  werbende  Kapital) , 
i.  e.  their  capital  stock,  surplus,  deposits  and  credits  on 
current  account. 


287 


National    Monetary     Commission 


Amount  of  bills  outstanding  (acceptances  including  "  avals"  and  checks)  .2*> 

In  percent- 

ages of  the 

Year. 

In  marks. 

In  percent- 
ages of  the 
figures  of 
1883. 

In  percent- 
ages of  the 
aggregate 
capital  of 
the  8  great 
banks. 

In  percent- 
ages of  the 
aggregate 
capital  and 
surplus  funds 
of  the  8  great 
banks. 

aggregate 
capital,  sur- 
plus funds, 
deposits,  and 
credits  on 
current 
account  of 

the  8  great 

banks. 

1883  

189,  795,  100 

100.  0 

61.2 

53-3 

"  26.6 

1884  

220,  532,  ooo 

116.  2 

68.5 

59-7 

26.  9 

1885  

227,  229,  700 

119.7 

70.  4 

61.  2 

26.  5 

1886  

234,412,800 

123-5 

70.  4 

60.  4 

26.6 

1887  

245,  569,000 

129.  4 

69.  2 

58.8 

27.8 

1888  

254,  347,  500 

134.0                    69.  3 

58.  5 

2  K  .  I 

1889  

274,778.  100 

144-8                      63.5 

52-  i 

23-  2 

1890  

254,  338,  ooo 

134-0                      57.5 

46.8 

22.7 

1891 

248,  280,  300 

130.  8 

52-9 

43-  i 

21.7 

1892  

299,  049,  800 

157-  6 

62.4 

50.  9 

25-8 

1893  

301,  806,  600 

159.0                    63.0 

51-2 

25-4 

1894  

354,  241,  200 

186.6   !                 74.  o 

60.  o 

25-8 

1895                        452  919  300 

238.  6      i                               T&      T 

63.  6 

28.  6 

1896  441,  416,  900 

232.  6 

74-  2 

59-  9 

26.7 

1897  488,521,000 

257-4 

70.8 

57-4 

26,  9 

1898  535,649,400 

282.  2 

70.5 

57-0 

25-1 

1899  597.832,  100 

315-0 

73-  4 

59-o 

25-9 

1900  670,  299,  500 

353-2 

82.2 

66.0 

27-8 

1901  !          627,917,300 

330.8 

77-o 

61.7 

25-2 

1902  673,  741,  800 

355-0 

77-3 

62.7 

24-9 

1903  !          745  ,  542,  ooo 

392.  8 

84.  5 

67.3 

24.  4 

1904.                 i            88e    TIT-    inn 

466.  7 

88.  7 

69.  8 

1905  

i,  052,  922,  800 

554-8 

99-9 

78.8 

24.6 

1906 

i,  162,  922,  900 

612.7 

81.  i 

1907  

*•  275,  564,  600 

672.  i 

114-  5 

88.4 

26.5 

1908  

i,  188,  077,  900 

626.  o                  105.  7 

81.4 

23-5 

The  table  reveals  the  same  development  which  was 
noticeable  with  regard  to  the  bill  circulation,  namely, 
that  the  amount  of  acceptances  in  1903  had  not  only 
risen  again  to  a  point  reached  in  1889,  but  had  even 
largely  gone  beyond  it.  In  1908  there  was  a  considerable 
decline  in  the  amount  of  acceptances  of  these  eight  Berlin 
banks. 


288 


The     German     Great    Banks 

In  conclusion  it  is  of  interest  to  note  the  ratio  of  bank 
acceptances  issued  by  all  German  credit  banks  (with  a 
capital  of  at  least  one  million  marks  each)  to  the  average 
bill  circulation  (in  millions  of  marks).291 


Year. 

Average  bill  cir- 
culation, assum- 
ing an  average 
period  between 
date  and  ma- 
turity of  75  days. 

Bank  acceptances  on 
December  3  1  . 

Millions  of 
marks. 

Per  cent. 

l8gc 

3,050 
3,275 
3.505 
3.875 
4,  187 
4,660 
4,595 
4.301 
4,453 
4,640 
5,  140 

706 
752 
825 
984 
•  153 
,294 
.136 
.176 
,  300 
,  400 
,600 

23 

23 

23 
25 

28 
28 
25 
27 
29 

30 
3i 

1896.               ...                                  

1897  
1898 

i899  
1900  

1902                  .                                                        .  . 

1903  
1904  

1905 

(D)    THE   DISCOUNT  BUSINESS.292 

German  credit  banks,  like  others  of  the  same  class,  have 
a  special  motive  for  investing  their  own  and  their  deposi- 
tor's funds  in  the  bill  discounting  business,  since  they  are 
at  the  same  time  banks  of  deposit,  and  thus  are  obliged 
to  invest  a  large  part  of  their  deposits  in  securities  matur- 
ing at  an  early  date.  As  the  various  bills  discounted 
become  due  on  different  dates,  the  outflow  of  cash  is 
balanced  by  an  assured  inflow  of  cash  to  redeem  bills,  with 
a  resulting  increase  in  the  cash  reserve  and  the  opportunity 
for  new  investments. 

The  first  rank  in  this  line  of  investment  is  held  by  those 
bills  that  are  regarded  as  prime  discount  bills  throughout 
the  German  discount  market.  Such  are  the  acceptances  of 
the  six  foremost  Berlin  banks,  namely,  the  Deutsche  Bank, 


903 1 1 u 1 1 20 


289 


National    Monetary     Commission 

Disconto-Gesellschaft,  Darmstadter  Bank,  Dresdner  Bank, 
Berliner  Handelsgesellschaft,  and  the  A.  Schaaffhausen'- 
scher  Bankverein,  as  well  as  two  private  banks  in  Berlin, 
Mendelssohn  &  Co.  and  S.  Bleichroder. 

In  a  general  way,  bills  of  the  above  description  are 
regarded  as  representative  generic  values,  in  the  sense  that 
the  standing  of  the  seller  who  places  them  on  the  market 
in  any  particular  case  has  no  effect  on  the  terms  of  discount, 
that  is  to  say,  the  rate  and  the  commission,  as  would  be 
the  case  with  other  bills  offered  for  discount.  However, 
since  in  the  case  of  these  prime  bills  the  rate  of  private 
discount  forms  only  the  upper,  not  the  lower  limit,  the 
statement  just  made  does  not  imply  that  they  may  not 
occasionally  be  discounted  below  that  rate. 

The  second  rank  is  held  by  those  bills  which  are  regarded 
as  prime  bills  in  the  local  markets  of  Berlin,  Hamburg,  and 
Frankfort-on-the-Main  (in  addition  to  those  of  the  preced- 
ing class)  and  are  discounted  at  the  private  rate,  provided 
they  fulfil  the  existing  conditions  of  the  bourse  as  regards 
time  and  amount,  a  condition  which  applies  also  to  those 
of  the  preceding  class. 

According  to  the  regulations  of  the  Berlin  Bourse 
(similar  ones  prevail  in  Frankfurt-on-the-Main) ,  these 
prime  bills  (or  private  discounts)  must  be  payable  in  Berlin 
or  at  a  place  where  there  is  a  branch  of  the  Reichsbank, 
must  be  at  least  5,000  marks  in  amount,  and  run  not  less 
than  two  nor  more  than  three  months.  However,  in 
fixing  and  quoting  actual  market  rates  of  private  discount, 
no  difference  is  made  between  sixty-day  and  ninety-day 
bills  and  between  "representative"  and  " nonrepresenta- 
tive"  private  discounts,  a  practice  which  to  my  mind  is 


290 


The     German     Great    Banks 

not  correct.  This  quotation  of  the  private  discount  rate 
is  made  in  Berlin,  not  officially,  indeed,  but  yet  after  a 
uniform  fashion,  by  a  private  central  agency,  solely 
interested  in  the  discount  business  and  acting  under 
instructions  from  those  engaged  in  the  business.293  The 
rate  of  private  discount  prevailing  at  the  bourse  is  oc- 
casionally underbid,  as  a  result  of  competition,  in  the 
bill-discounting  operations  which  take  place  outside  of 
the  bourse.  The  Reichsbank,  however,  does  not  buy  bills 
in  Berlin  below  the  Reichsbank  rate  of  discount. 

The  acceptances  of  the  largest  mercantile  establish- 
ments and  industrial  undertakings  are  not  regarded  as 
prime  discounts.  However,  as  noted  in  the  previous 
chapter  (p.  276),  these  firms  do  not  generally  regulate 
their  obligations  by  means  of  their  own  acceptances,  but, 
as  a  rule,  by  those  of  their  banks.294 

Aside  from  these  acceptances  of  the  leading  commercial 
and  industrial  firms  just  mentioned,  which  are  of  rare 
occurrence,  the  acceptances  of  most  of  the  first-class  and 
second-class  provincial  banks  and  bankers,  while  regarded 
as  nonrepresentative  bills  in  the  above  sense,  are  admitted 
to  the  benefits  of  the  private  rate  of  discount.  In  this 
case  the  terms  of  discount  are  fixed  in  accordance  with 
personal  and  objective  considerations,  often  quite  incom- 
mensurable in  their  nature.  If,  for  example,  one  of  these 
banks,  or  even  a  bank  not  belonging  to  this  class,  allows — 
in  the  opinion  of  the  bourse,  which  is  specially  sensitive 
in  this  matter — its  credit  to  be  unduly  strained  it  is  apt 
to  be  promptly  reminded  of  this  fact  by  finding  the  rate 
of  private  discount  of  its  acceptances  raised,  even  though 
but  by  one-sixteenth  of  i  per  cent,  which  thus  occasionally 


291 


National     Monetary     Commission 

constitutes  a  very  effective  means  of  checking  the  over- 
loading of  credit  in  the  form  of  excessive  acceptances.295 

Furthermore,  with  regard  to  this  class  of  paper,  and  still 
more  with  regard  to  other  discount  material  reaching  the 
bourse  and  not  admitted  to  the  privilege  of  the  private 
rate  of  discount,  the  principle  holds  that  only  those  bills 
are  discountable  at  private  discount  that  would  pass  as 
"prime  bills"  even  without  the  acceptance  of  a  bank. 
Such,  in  fact,  ought  to  be  the  policy  of  the  banks  them- 
selves in  deciding  whether  a  discount  is  to  be  made.298 

Though  there  be  ample  reason  for  recognizing  the  best 
commercial  and  industrial  acceptances  as  "prime  bills," 
yet  the  general  discount  trade  gives  a  decided  preference 
to  the  bank  acceptance  as  being  easier  to  negotiate,  with 
the  result  that  the  commercial  and  industrial  acceptances 
are  being  more  and  more  displaced  by  bank  acceptances. 
This  is  one  of  the  factors  that  concurred  in  producing  the 
result  noted  above  under  C  (p.  279),  that  some  70  to  75 
per  cent  of  all  the  acceptances  discounted  by  German 
credit  banks  and  forming  part  of  their  bill  holdings  are 
bank  acceptances,  discounted  by  the  banks  at  the  rate 
of  private  discount.  As  these  acceptances  are  payable  in 
gold,  they  are  in  demand  even  among  foreign  firms  and 
banks,  especially  note  banks.  These  acceptances  repre- 
sent the  amounts  granted  by  the  credit  banks  on  dis- 
counted bills,  either  to  customers  having  a  current  account 
or  to  outsiders  having  no  such  account,  as  well  as  the 
foreign  bills.  Here  also  the  policy  is  "to  take  care  that 
.the  terms  of  settlement,  never  exceeding  three  months  in 

uration,  shall  be  distributed  over  all  the  months  of  the 

I 

'year,  and,  in  particular,  that   relatively  large  amounts 


1 


292 


The     German     Great    Banks 


shall  become  due  at  the  end  of  each  quarter,  when  settle- 
ments are  heavier  "  (die  schiveren  Quartalstermine.)™7     Th 
material  in  the  shape  of  bills  available  for  discounting  i 
very  large  in  Germany. 

The  sum  total  of  bills  of  exchange  in  Germany,  put  into 
circulation  in  the  course  of  any  one  year,  was  calculated 
by  W.  Prion  298  for  twenty-one  years,  from  the  proceeds  of 
the  stamp  tax  on  bills  of  exchange  as  follows : 

[In  millions  of  marks.] 


1885.. 

.  12,060 

1890  . 

.  .  14,  O2O 

I895.  •• 

15,241 

1900  

23,  204 

1886.. 

.  11,826 

1891. 

.  .  14,  606 

1896... 

16,  386 

1901 

22,  965 

1887.  . 

.  12,065 

I892. 

.  .  14,  284 

1897... 

17.526 

1902 

21,505 

1888.. 

.  12,  198 

1893. 

.  -  H.585 

1898.  .  . 

19,374 

1903  

22,  266 

1889.  . 

.  13,  2O6 

,1894. 

•  .  H»  748 

1899  -.. 

20,  937 

1904  

23,  201 

For  1905  the  estimate  was  25,506,000,000  marks,  that 
is  to  say,  the  formidable  figure  of  25^2  billion  marks,  of 
which  the  Reichsbank  bought  9,1 75,000,000  marks'  worth, 
or  35.9  per  cent. 

For  1905,  on  the  basis  of  the  stamp  tax  of  14,100,000 
marks  and  a  total  amount  of  bills  of  25,500,000  marks 
(deducting  10  per  cent  for  rounding  off),  and  assuming  an 
average  of  seventy-five  days  for  the  circulation  period  of 
the  bills,  it  is  found  that  the  average  bill  circulation 
was  5,100,000,000  marks  (31  per  cent  of  which  were 
bank  acceptances).299  Accordingly  for  1907  (stamp  tax 
19,700,000  marks,  total  amount  of  bills,  less  10  per  cent, 
in  round  numbers  31,500,000,000  marks)  we  get  in  round 
numbers  the  sum  of  6  billion  marks. 

It  may  be  well,  however,  to  caution  the  reader  against 
drawing  any  general  conclusions  regarding  the  higher  or 
lower  economic  development  of  a  country  from  the  larger 
or  smaller  amount  of  bills  circulating  in  it.  Such  con- 

293 


National    Monetary     Commission 

elusions,  though  not  infrequently  made,  are  bound  to  be 
in  most  cases  deceptive.  The  amount  of  bills  circulating 
in  a  country  is  determined  by  an  infinite  variety  of  factors, 
such  as  the  more  or  less  pronounced  "industrialization," 
the  greater  or  less  degree  to  which  industry  and  commerce 
are  habituated  to  bill  credit,  or  to  its  complete  or  partial 
replacement  by  cash  payments;  the  higher  development 
and  greater  refinement  or  the  greater  or  less  costliness  of 
the  other  forms  of  credit,  such  as  the  collateral  and  report 
business;  the  favorable  or  unfavorable  state  of  the  balance 
of  international  payments;  the  greater  or  less  degree  to 
which  the  population  is  habituated  to  the  use  of  bank 
notes,  etc. 

Were  it  not  so,  one  would  have  to  infer  that  the 
United  States  with  its  relatively  small  bill  circulation,  is 
backward  in  its  economic  development.  On  the  other 
hand,  from  the  fact  that  in  France  from  1876  to  1907 
the  average  per  capita  bill  circulation  has  increased  con- 
siderably more  than  in  Germany,  one  would  have  to  infer 
that  in  France  there  had  been  an  enormous  and  rapid 
economic  development.  Both  conclusions  would  be  wrong. 

France,  for  example,  being  a  creditor  nation  (while 
Germany  is  a  debtor  nation),  has  a  large  favorable  bal- 
ance of  payments,  since  both  the  number  of  her  popula- 
tion and  her  industrial  activity,  especially  her  export 
industry,  have  for  some  time  been  stationary,  and  the 
available  resources  of  the  nation  are  in  large  part  invested 
in  the  form  of  savings  deposits  and  government  bonds, 
while  commercial  and  industrial  enterprises  and  stock 
companies  attract  them  far  less  than  in  Germany.  The 
favorable  balance  of  payments  is  reenforced  by  the  far 


294 


The     German     Great    Banks 


greater  amount  of  foreign  securities  in  the  possession  of 
France,  and  by  the  receipts  from  the  enormous  influx  of 
foreigners,  especially  in  Paris  and  on  the  Riviera. 

Hence,  before  drawing  general  conclusions  regarding 
any  country,  after  ascertaining  the  amount  of  bills  circu- 
lating in  it,  we  shall  have  to  examine  its  peculiar  economic 
conditions  and  the  peculiar  organization  of  its  systems  of 
payment  and  credit,  as  we  are  trying  to  do  in  this  book 
for  Germany. 

This  being  premised,  let  us  note  the  following: 
The  amount  of  bills  held  by  all  the  German  banks, 
including  note  banks  30°  and  mortgage  banks,301  was  as 
follows:302 


Business  year. 

Number  of 
banks. 

Amount  of 
bills  (in 
millions  of 

marks)  . 

Business 
year. 

Number  of 
banks. 

Amount  of 
bills  (in 
millions  of 
marks). 

1883  

1896 

146 

1884  
1885  

H3 
113 

,246 
,  248 

1897  
1898 

150 
156 

,  190 
360 

1886  
1887  

116 
115 

,  277 
,364 

1899  
1900  

164 
165 

.  946 

.  087 

1888  

114 

114 

i  307 

1901 

171 

776 

1889 

,587 

167 

812 

1890  

61 
136 

,503 

1891  

135 

,661 

1904 

1  75 

3  081 

1892  

134 

.  650 

1905  

182 

3,507 

1893    .  . 

611 

188 

1894  

137 

736 

1907 

203 

1895  

135 

,857 

1908  

214 

4,310 

We  see  from  this  that  in  the  boom  year  1899  tne  amount 
of  bills  in  all  the  banks  (including  note  banks  and  mort- 
.gage  banks)  rose  to  2,946,000,000  marks;  that  in  1900, 
immediately  before  the  crisis,  it  even  rose  to  3,087,000,000 
marks  and  that  during  the  crisis  of  1901  it  fell  to 
2,776,000,000  marks. 


295 


I 


National     Monetary     Commission 

However,  as  early  as  1903,  as  noted  when  speaking  of 
the  acceptance  circulation  of  the  banks,  the  amount  of 
bills  had  again  risen  to  2,972,000,000  marks,  having  thus 
not  merely  equaled  but  even  exceeded  the  amount  of  the 
greatest  boom  year,  1899.  This  was  on  the  whole  a 
normal  and  satisfactory  development.  Only  an  unhealthy 
increase  in  the  amount  of  bills,  not  accompanied  by  a 
quiet  and  steady  progress  in  economic  development, 
would  be  a  matter  of  regret. 

Finally,  the  amount  of  bills  in  the  German  credit  banks 
alone  (with  a  capital  of  at  least  i  ,000,000  marks  each)  and 
the  total  amount  of  bills  in  the  great  Berlin  banks  alone, 
during  the  last  eleven  years,  was  as  follows  (according 
to  the  Deutscher  Okonomist:  303 


Year. 

Amount  of  bills 
in  German 
credit  banks 
(in  million 
marks)  . 

Amount  of  bills 
in  the  6  great 
Berlin  banks 
(in  million 
marks)  . 

1898                                                                    

055 

660 

1899  
1900  

,327 
.583 

716 

867 

1901   .             .        ...             .    .        ...                     .  .  . 

,  462 

828 

1902  

,483 

859 

518 

865 

1904  
1905  
1906. 

-773 
,  995 
447 

1,075 
,  231 
466 

1907  
1908  .    . 

T62i 

742 

,509 

In  1908  all  the  German  banks  together  held  bills  to 
the  amount  of  4,300,000,000  marks,  the  German  credit 
banks  together  more  than  2,700,000,000,  the  six  great 
Berlin  banks  in  round  numbers  i,5Oo,ooo,ooo.304  Assum- 
ing, for  1905,  a  total  bill  circulation  of  5,100,006,000  marks 


296 


The     German     Great    Banks 


and  the  bill  holdings  of  the  six  great  Berlin  banks  in  the 
same  year  at  about  1,000,000,000  (1,064,000,000)  —  as 
against  1,231,000,000  marks,  given  in  the  above  table, 
Prion  estimates  the  share  of  those  six  great  banks  in  the 
total  bill  circulation  for  1905  at  20.8  per  cent.  On  page 
279  we  noted  that  as  a  rule  about  70  to  75  per  cent  of 
the  bill  holdings  of  the  German  credit  banks  consists  of 
bank  acceptances.  In  that  connection  we  also  discussed 
the  various  classes  of  these  bank  acceptances. 

In  the  Reichsbank  the  average  amount  of  domestic  bills 
was  as  follows:  1905,  775,723,000  marks;  1906,  946,201,000 
marks;  1907,  1,060,076,000  marks. 

The  latter  amount  was  classified  as  follows  : 


Amount. 

Per  cent. 

Marks. 

(a)  Commerce,  transportation,  and  insurance  . 

187,  948,  ooo 

17-  .73 

(6)  Banking  and  credit  institutions  (as  central  agencies 

for  the  credit  demand  of  business)  

SS9.97S.ooo 

52.  82 

26   83 

(d)  Agriculture  and  allied  trades            .                       .  . 

(e)  All  other  credit  users  

16  647   ooo 

Total  

i,  060,  076,  ooo 

IOO.  00 

The  profits  from  the  bill  brokerage  business,  that  is  to 
say,  first  and  foremost  the  profits  obtained  from  discount 
transactions,  have  not  hithereto  been  always  separately 
stated  in  the  balance  sheets  of  the  German  credit  banks, 
but  have  in  many  cases  been  combined  with  the  intefest 
earnings,  or  with  the  profits  gained  from  trading  in  foreign 
bills  and  specie.  (Demsen  und  S  or  ten) .  Such,  for  example, 
is  the  practice  of  the  Berliner  Handelsgesellschaft. 

In  England,  on  the  contrary,  according  to  Edgar  Jaffe's 
investigations,305  the  amount  of  bills  at  the  disposal  of 


( 


297 


National     Monetary     Commission 

banks  for  the  purpose  of  discounting  has  shown  an  almost 
continuous  decline. 

One  reason  for  this  is  that  the  English  deposit  banks, 
which  discount  only  for  their  customers,  receive  from  them 
only  a  part  of  their  bills  for  discounting  and  as  a  rule  the 
less  desirable  part,  while  the  larger  part  of  the  best  bills 
is  turned  over  by  these  customers  directly  to  the  bill 
brokers,  so  that  the  deposit  banks  are  even  obliged  to  buy 
from  these  brokers  a  part  of  the  bills  necessary  for  the 
investment  of  their  funds.  The  deposit  banks  themselves 
also  sell  to  the  bill  brokers  all  bills  on  foreign  countries, 
as  the  banks  themselves  do  not  discount  these. 

Another  reason,  already  mentioned,  why  the  amount  of 
bills  circulating  in  England  has  declined  is,  because,  owing 
to  the  more  advanced  organization  of  the  system  of  pay- 
ment and  credit  in  that  country,  cash  payment,  at  least 
among  the  largest  firms,  is  tending  more  and  more  to  take 
the  place  of  bills,  so  that  the  very  best  commercial  bills 
are  progressively  disappearing  from  the  English  money 
market. 

Similarly  bills  drawn  by  importers  of  raw  material  on 
the  selling  commission  merchant,  the  so-called  brokers' 
paper,  are  gradually  dropping  out  of  use,  being  in  large 
measure  replaced  by  collateral  loans  on  the  strength  of 
warrants  on  merchandise  stored. 

Finally,  the  number  of  bills  drawn  in  England  on  for- 
eign countries  is  very  small  compared  to  the  number  of 
bills  drawn  by  foreign  countries  on  England  (about  i  to  9) , 
because  the  prices  of  goods  exported  from  England,  owing 
to  the  larger  market  for  London  pound  bills,  are  calcu- 
lated in  pounds  sterling,  and  payment  accordingly  is 
ordinarily  made  in  the  shape  of  a  bill  on  London. 

298 


The     German     Great    Banks 


As  a  result  of  all  these  conditions,  the  English  banker 
wishing  to  invest  his  funds  is  limited  in  the  main  to  the 
"  domestic  bills,  steadily  declining  in  number  and  quality, 
while  his  main  interest  in  foreign  bills  lies  in  the  accept- 
ance business." 306 

As  regards  the  English  deposit  banks,  there  was  for- 
merly a  great  abuse  in  the  granting  of  credit  by  acceptance 
of  drafts,  and  as  a  consequence  the  acceptance  business, 
too,  has  declined  to  such  extent  that  it  is  to-day  con- 
ducted only  on  a  very  modest  scale  and  under  the  safe- 
guard of  securities.  Thus  the  acceptance  business,  even 
in  so  far  as  it  is  carried  on  against  shipped  goods — that 
is  to  say,  against  bills  of  lading,  etc. — rests  almost  entirely 
in  the  hands  of  the  so-called  merchant  bankers  307  and  of 
the  foreign  banks,308  while  secured  or  unsecured  loans 
in  current  account  (loans  or  advances)  constitute  to-day 
the  principal  form  of  credit  of  the  English  deposit  banks, 
which  is  granted  exclusively  to  their  regular  customers. 
However,  owing  to  the  easy  transition  from  short-term 
to  long-term  credit  and  the  danger  of  tying  up  funds 
in  the  latter,  the  same  difficulties  and  complaints  arise  in 
England  as  in  the  granting  of  industrial  credit  by  our 
own  credit  banks.309 

In  contrast  with  these  English  conditions,  we  saw  that 
in  Germany  the  bill  circulation  and  the  bill  holdings  of; 
the  banks,  especially  the  credit  banks,  are  very  large,  and] 

that  of  the  total  assets  of  the  German  credit  banks  in  1907! 

(as  well  as  in  1895  and  i896)Lin  round  numbers,  53  peri 
cent  appeared  under  the  head  of  loans  (Debitoreri)  and  20 
per  cent  under  the  head  of  bills. 

The  rate  of  private  discount  resulting  from  supply  and 
demand  of  short-term  credit  at  home  and  abroad — that 


299 


National    Monetary     Commission 


is  to  say,  the  rate  of  interest  to  be  paid  for  short-term 
credit  in  the  way  of  discounting  of  private  bills — is,  of 
course,  subject  to  frequent  and  wide  oscillations.  From 
it,  in  conjunction  with  other  factors,  especially  the  Reichs- 
bank  discount  and  the  exchange  rates,  important  con- 
clusions may  be  drawn  regarding  the  business  conditions, 
especially  the  state  of  trade  and  industry.  This  is  un- 
doubtedly true,  even  though,  as  we  have  seen,  the  bill 
acceptance  is  not  merely  a  means  of  granting  credit  to 
trade  and  industry  but  serves  also  to  a  large  extent  to 
procure  the  means  for  bourse  speculation.  But  while  the 
rate  of  private  discount  corresponds  in  a  general  way  to 
the  condition  of  the  money  market  at  any  given  moment, 
the  Reichsbank  discount  rate  is  determined  not  only  by 
that  consideration  but  also  by  the  general  economic  situ- 
ation and  by  the  task,  incumbent  on  the  Reichsbank,  of 
regulating  credit  and  protecting  the  money  standard. 

It  has  been  pointed  out,  and  it  must  be  admitted,  that 
the  difference  between  the  official  rate  of  discount  estab- 
lished by  the  Reichsbank  for  short-term  bill  credit  and 
the  rate  of  private  discount  quoted  in  the  open  market  in 
Berlin  for  short-term  private  bills  has  been  almost  uni- 
formly greater  during  this  period  than  at  any  other  Euro- 
pean money  center. 

The  differences  were  as  follows: 


Year. 

Berlin. 

Paris. 

London. 

Vienna. 

1876-1880                                       

i.  19 

0.51 

0.51 

o.  36 

1881-1885 

.98 

•  43 

64 

•  5  * 

1886—1890 

i.  04 

•  5° 

•  93 

•  5° 

1891-1895  

i  .  ii 

•55 

i.  03 

.38 

•  7i 

.  09 

.60 

.26 

1901—1905                                                  .  .  .  . 

I  .  OI 

.60 

•  43 

•  5° 

1906  

i.  ii 
•  9i 

.28 
.06 

.  22 

.  4O 

.  21 

.  22 

300 


The     German     Great    Banks 

It  is  also  true  that  a  difference  of  over  2  per  cent 
between  official  and  private  discount  occurred  in  Berlin 
seven  times  in  the  period  1895-1900  and  nineteen  times 
in  the  period  1903-1907,  while  no  such  difference  was  ever 
recorded  in  L,ondon  and  Paris.310  In  explanation  of  this 
phenomenon  it  was  stated  that  this  low  rate  of  private 
discount,  occurring  in  part  simultaneously  with  a  high 
rate  of  bank  discount,  was  due  to  deliberate  endeavors 
on  the  part  of  banking  circles  to  lower  the  rate  and  to 
keep  it  low,  for  their  sole  benefit,  in  plain  opposition  to 
the  official  discount  policy  of  the  Reichsbank,  even  in 
cases  where  the  Reichsbank  raised  the  rate  of  bank  dis- 
count, either  to  prevent  an  outflow  of  gold  abroad  or  to 
draw  foreign  gold  into  Germany. 

It  is  not  difficult  to  prove  that  the  above-mentioned 
great  difference  between  the  rates  of  private  discount 
and  Reichsbank  discount  is  not  due  to  the  cause  alleged, 
though  it  is  much  more  difficult  to  assign  the  true  reasons 
for  that  phenomenon  with  even  a  comparative  degree  of 
probability. 

First  of  all,  it  is  not  true  that  the  banks,  and  especially 
the  great  banks,  are  essentially  interested  in  keeping  the 
rate  of  private  discount  low  by  artificial  means;  on  the 
contrary,  being  buyers  of  bills,  in  which  they  invest 
their  funds,  they  are  interested,  like  every  buyer,  in  being 
able  to  deduct  the  largest  possible  amount  of  interest  on 
these  bills.311  As  a  matter  of  fact,  very  large  amounts 
of  private  bills  are  held  not  only  by  the  great  banks  and 
the  other  credit  banks  but  also  by  the  Reichsbank  and 
the  other  four  note  banks  as  well  as  by  the  mortgage 
banks,  cooperative  credit  societies  (Genossenschaften), 


3oi 


National    Monetary     Commission 

savings  banks,  insurance  companies,  commercial  and  in- 
dustrial enterprises,  etc. 

This  extensive  participation  of  other  buyers  of  bills 
clearly  proves  that  a  low  rate  of  private  discount  does 
not  always  nor  exclusively  "benefit"  the  credit  banks, 
let  alone  the  great  banks.  On  the  contrary,  it  benefits, 
first  and  foremost,  the  commercial  and  industrial  firms, 
which,  profiting  by  that  low  rate,  draw  on  the  banks, 
while  the  banks  are  benefited  only  when,  either  in 
response  to  demand  or  of  their  own  accord,  they  pass  the 
bills  on  among  their  customers  or  into  foreign  countries. 

Thus  a  deliberate  or  intentional  " thwarting"  of  the 
discount  policy  of  the  Reichsbank  by  the  large  banks 
by  way  of  an  artificial  lowering  of  the  rate  of  private 
discount  is  out  of  the  question,  especially  since  they  may 
be  in  the  market  both  as  buyers  and  sellers  of  bills, 
the  latter  especially  in  case  of  orders  on  commission 
(Kommissionsauftrageri) .  As  a  general  rule,  the  large 
banks,  having  regard  to  the  interest  which  they  have  to 
pay  on  the  deposits  held  by  them  and  the  interest  which 
they  in  turn  draw  for  the  credit  which  they  grant  on 
bills,  collateral  loans,  and  contango  (Reports),  are  essen- 
tially interested  in  making  the  rate  of  private  discount 
conform  as  closely  as  possible  to  the  rate  of  bank  dis- 
count, since  their  outlay  on  account  of  interest  depends 
on  the  rate  of  bank  discount,  while  the  receipts  in  the 
way  of  interest  depend  on  the  rate  of  interest  prevailing 
in  the  market.  Prion312  justly  points  out  that  the  great 
banks,  in  calculating  the  interest  on  the  advances  granted 
by  them,  charge  the  lombard  rate  of  interest  of  the  Reichs- 
bank, and  that  when  the  difference  between  bank  dis- 


302 


The     German     Great    Banks 

count  and  private  discount  greatly  exceeds  the  average, 
the  customers  have  a  strong  incentive  to  profit  by  the 
cheaper  acceptance  credit,  which  would  lead  to  an  un- 
welcome increase  both  in  the  offer  of  bills  and  in  the 
acceptance  obligations  of  the  banks. 

On  the  other  hand,  it  is  not  to  be  denied  that  the  great 
banks  and  other  large  discounting  concerns  exercise 
a  certain  influence  on  the  fluctuations  of  the  rate  of 
private  discount  and  its  quotation  at  the  bourse,  seeing 
that  in  this  field,  as  in  others,  they  are  in  a  position  to 
compensate  more  or  less  the  orders  for  the  purchase  or 
sale  of  private  bills  by  means  of  the  sums  which  they 
themselves  invest  in  or  withdraw  from  the  private-bill 
business,  and  to  bring  only  the  remainder  on  the  market. 

There  are  also  exceptional  cases  in  which  the  great  banks, 
as  well  as  governmental  and  municipal  offices  in  Germany 
and  abroad,  are  decidedly  interested  in  keeping  the  rate  of 
discount  as  low  as  possible,  and  may  attempt,  at  any  rate, 
by  heavy  offerings  of  cash  or  other  measures,  perhaps  with 
the  cooperation  of  all  the  large  discount  dealers  (Gross- 
diskonteure) ,  to  lower  the  rate  of  private  discount  or  to 
keep  it  low,  for  example  when  the  issue  of  public  bonds, 
domestic  or  foreign,  bearing  a  higher  rate  of  interest  is  in 
contemplation.  However,  the  success  of  such  attempts 
will  not  depend  solely  on  the  power  of  the  large  discount 
dealers,  even  if  acting  in  concert,  since  the  discount 
market  is  intimately  connected  with  the  entire  money 
market,  and  consequently  the  rate  of  private  discount 
depends  on  a  number  of  other  factors,  such  as  the  rate  of 
bank  discount  and  its  probable  development,  the  foreign 
exchange  rates,  the  rates  of  interest  for  call  money  and 


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National     Monetary     Commission 

monthly  settlement  loans,  etc.  In  view  of  this,  and 
the  usually  very  large  amounts  of  the  bills  marketed, 
a  notable  or  long-continued  artificial  lowering  of  the  rate 
of  bank  discount  will  be  found  impracticable,  even  with 
the  cooperation  of  all  the  large  discount  dealers.  In 
fact,  if  it  were  practicable,  it  would  prove  a  very  serious 
matter,  especially  on  those  occasions  when  it  is  above  all 
desirable  that  the  great  banks  should  go  hand  in  hand 
with  the  Reichsbank  and  lend  their  energetic  support  to 
measures  which  it  deems  requisite  in  the  interest  of  the 
general  economic  well-being. 

If,  for  example,  as  a  necessary  and  natural  consequence 
of  an  unfavorable  turn  in  the  balance  of  international  pay- 
ments, the  foreign  exchange  rates  (Demsenkurse)  are  so 
high  that  there  is  danger  of  an  outflow  of  gold,  especially 
of  a  withdrawal  of  foreign  gold  held  on  deposit  in  Germany, 
the  raising  of  the  official  rate  of  bank  discount  will  as  a  rule 
suffice  to  stave  off  for  the  time  being  or  postpone  the  com- 
ing of  the  moment  at  which  the  exportation  of  gold  begins 
to  pay,  unless  indeed  there  be  a  demand  for  gold  at  any 
price,  as  from  America  in  1 907.  This  precaution,  however, 
can  accomplish  its  object  only  when,  as  is  usually  the  case, 
the  rate  of  private  discount  is  simultaneously  raised  to,  or 
maintained  at  a  correspondingly  high  level,  as  indeed  gen- 
erally happens. 

If  in  such  cases  the  raised  rate  of  bank  discount  consid- 
erably exceeds  that  of  foreign  bank  discount,  foreign  coun- 
tries, as  a  rule,  in  order  to  share  in  the  advantage  of  the 
high  rate  of  discount  in  Germany,  will  temporarily  in- 
crease their  gold  deposits  in  Germany,  independently  of  the 
state  of  the  balance  of  payments,  so  that  in  such  case  the 


3°4 


The     German     Great    Banks 

raising  of  the  bank  discount  rate  may  lead  to  a  temporary 
gold  importation  from  abroad;  again,  however,  on  the 
supposition  that  the  private  discount  rate,  too,  rises  to  or  is 
maintained  at  a  correspondingly  higher  level.313 

In  these  cases,  however,  in  which  the  prevention  of  a 
rise  or  of  the  maintenance  of  a  high  level  of  private  dis- 
count rate  would  be  especially  dangerous,  the  great  banks 
and  other  large  discount  dealers,  as  a  rule,  have  no 
motive  even  to  attempt  the  exercise  of  such  an  influ- 
ence, because  the  probability  is  that,  when  the  raising  of 
the  bank  discount  rate  is  desirable  in  order  to  stimulate 
the  importation  of  gold  from  abroad  or  to  prevent  the  ex- 
portation of  gold,  the  situation  will  generally  be  such  that 
security  issues  are  out  of  question. 

The  real  reason  for  the  great  difference  between  the  rate 
of  private  discount  and  the  rate  of  bank  discount  in  Ger- 
many is  probably  to  be  sought,  first  and  foremost,  in  the 
fact  that  in  Germany,  as  contrasted  with  France,  there  is  a 
relatively  much  larger  number  of  persons  or  establish- 
ments, seeking  to  discount,  whose  competition  in  taking  up 
good  bills  prevents  the  formation  of  a  rate  of  private  dis- 
count corresponding  more  closely  to  that  of  the  Reichs- 
bank.  A  further  reason  may  be  found  in  the  fact  that  the 
rate  of  private  discount  is  made,  at  least  in  a  general  way, 
in  conformity  with  the  ratio  of  supply  and  demand  exist- 
ing in  the  market.  On  the  other  hand,  the  rate  of  bank 
discount,  while  fixed  by  the  Reichsbank  with  an  eye  to 
the  regulation  of  credit  transactions  and  the  maintenance 
of  the  gold  standard,  depends  in  the  foremost  place 
on  the  favorable  or  unfavorable  condition  of  our  total 


90311°— ii 21  305 


National    Monetary     Commission 

balance  of  payments,  whose  primary  expression  is  to  be 
seen  in  low  or  high  exchange  rates. 

However,  another  important  factor  must  be  considered. 
In  Germany,  whose  trade  and  industry  make  far  larger 
credit  demands  than  is  the  case  in  France,  this  demand 
is  satisfied,  in  the  first  instance,  by  a  great  multitude  of 
credit  banks,  in  the  most  diverse  forms,  a  feature  in  which 
Germany  again  differs  from  France.  Thus  trade  and 
industry  in  Germany,  as  regards  their  demand  for  credit, 
especially  in  so  far  as  that  demand  is  to  be  satisfied  by  the 
discounting  of  short-term  bills,  depend  on  the  Reichsbank 
only  in  the  second  place.  As  soon  as  this  condition 
changes — that  is  to  say,  as  soon  as  the  absorbing  power 
of  the  credit  banks  is  exhausted,  as  may  happen  especially 
in  boom  periods — the  offer  of  short-term  prime  bills  on 
the  market  will  not  be  balanced  by  a  corresponding  num- 
ber of  discount  dealers.  As  a  result,  the  rate  of  private 
discount  will  rise  and  thus  the  difference  between  it  and  the 
Reichsbank  rate  will  grow  less.  This,  it  is  true,  will  be 
the  case  only  so  long  as  the  Reichsbank  in  its  turn  is  not 
compelled  to  raise  its  rate  of'  discount  in  order  to  restrict 
the  demand  for  credit  made  on  it,  especially  active  in 
boom  times. 

In  so  far,  however,  as  the  credit  banks,  especially  the 
great  banks,  do  exercise  an  influence  on  the  rate  of  private 
discount  and  the  difference  between  it  and  that  of  bank 
discount,  it  is  indeed  their  duty  to  aim  at  lessening  this 
difference  and  to  give  their  unstinted  support  to  the  dis- 
count policy  of  the  Reiclubank,  whose  influence  on  the 
private  discount  market,  one  of  the  most  important  fields 
of  credit  granting,  has  doubtless  been  considerably  dimin- 


306 


The     German     Great    Banks 

ished  through  the  concentration  of  the  great  banks.  This 
is  the  very  field  in  which  it  is  desirable,  in  the  interest  of 
the  general  public,  that  the  strict  policy  of  dividends— 
that  is  to  say,  of  purely  private  interests — be  subordinated 
to  public  economic  policy  in  cooperation  with  the  Reichs- 
bank,  the  more  so,  as  in  this  field  some  of  the  functions  of 
the  Reichsbank,  viz,  the  regulation  of  credit,  have  to  a  con- 
siderable extent  been  transferred  to  the  great  banks. 

It  must  be  acknowledged  that  the  great  banks  and 
other  great  discount  dealers  have  hitherto  shown  a  de- 
cided disposition  to  be  in  the  closest  possible  touch  with 
the  management  of  the  Reichsbank.  Even  Prion  bears 
witness  that  these  banks  occasionally  are  reluctant  to  buy 
treasury  bills  (Schatzanweisungen) ,  "  especially  when  the 
Reichsbank,  from  motives  of  discount  policy,  desires  to 
throw  considerable  sums  on  the  market  in  order  to  influ- 
ence the  rate  of  private  discount."314 

(E)    THE    LOMBARD   AND   REPORT   BUSINESS.315 

The  lombard  loan  (loan  on  collateral),  like  the  bill  dis- 
count, affords  to  trade,  agriculture,  industry,  and  private 
capital  the  opportunity  of  personal  credit,  for  short  terms, 
sometimes  also  for  longer  terms,  but  it  differs  from  the  dis- 
counting of  bills  in  this,  that  this  personal  credit  is  only 
granted  nn^p^urity. 

The  collateral  may  consist  of  merchandise,  which  in  the 
import  and  export  trade  is  replacecPby  bills  of  lading. 
These  the  merchant  or  manufacturer  pledges  in  order  to 
obtain  bank  credit,  which,  as  a  rule,  is  cheaper  than  mer- 
chandise credit  (Warenkre dit) .  This  bank  credit  he  there- 
upon uses  for  a  great  variety  of  purposes.  His  object  in 


307 


National    Monetary     Commission 

pledging  the  security  and  taking  the  loan  may  be,  as  we 
have  seen,  either  to  diminish  his  personal  risk  in  over-sea 
transactions  or  to  increase  temporarily  or  anticipate  the 
realisation  of  the  working  capital  tied  up  in  certain  indus- 
trial or  mercantile  transactions.  This  form  of  credit- 
granting  by  the  banks  may  give  rise  to  the  same  dangers 
that  we  described  above,  in  connection  with  the  accept- 
ance and  discount  credit  (transformation  of  the  original 
short-term  working  credit  (Betriebskredit)  into  investment 
credit  (Anlagekredit) .  Another  purpose  for  which  security 
is  pledged  is  to  avoid  loss  through  the  sale  of  merchandise 
at  low  prices  at  an  unfavorable  moment. 

The  collateral  may  also  consist  of  securities  or  bills, 
the  latter^Belng  in  fact  the  only  kind  of  pledges  admitted 
in  the  lombard  business  of  the  bourse. 

Lombard  loans  may  also  be  secured  by  insurance  poli- 
cies (at  surreladef^vaiue)  or  mortgages,  the  latter  being 
the  most  common  form  in  the  case  of  lombard  credit  in 
the  building  trade,  although  involving  some  risk,  since  it 
is  not  always  possible  to  realize  on  mortgages  at  any 
given  time.  Finally  the  collateral  may  consist  of  any 
other  kind  of  paper  and  claims  of  all  kinds. 

In  all  these  forms  of  secured  credit  the  first  thing  to 
be  considered  is  the  value  of  the  collateral,  the  person 
of  the  borrower  being  only  of  secondary  importance, 
which  is  not  the  case  in  ordinary  discount  credit.  How- 
ever, even  in  the  case  of  lombard  loans  the  person  of  the 
borrower  plays  some  part  at  the  bourse,  inasmuch  as  the 
amount  of  the  loan,  the  amounts  to  be  put  up  (Einschuss) , 
the  interest  to  be  paid,  and  the  other  conditions  of  the 
lombard  business,  in  a  word,  the  acceptance  or  rejec- 


308 


The     German     Great    Banks 

tion  of  the  paper  offered,  are  not  decided  without  ref- 
erence to  the  property  of  the  borrower,  his  solvency  and 
trustworthiness.  On  the  other  hand,  in  the  lombard 
business  of  the  banks,  with  their  regular  customers,  aside 
from  the  value  and  quality  of  the  pledge,  and  the  duration 
of  the  loan,  sometimes  extending  to  as  much  as  three 
months,  the  terms  of  the  loan  are  mainly  determined  by 
the  longer  or  shorter  duration  and  degree  of  intimacy  of 
the  business  connection,  the  amounts  involved  in  past 
business  transactions,  and  the  commissions  paid,  as  well 
as  the  other  advantages  which  the  bank  has  derived  or 
expects  to  derive  from  this  connection. 

For  obvious  reasons,  even  short-term  lombard  obliga- 
tions can  not  be  regarded  as  liquid  short-tennjinvest- 
ments  to  the  same  extent  as  ninety- day  bills,  and  accord- 
ingly article  17  (44,  No.  3)  of  the  bank  act  prohibits  the 
Reichsbank  and  the  other  four  note  banks  from  using  these 
lombard  obligations  for  their  note  reserve.  They  bear  no 
indorsements,  but  only  the  name  of  the  debtor,  and  in 
case  of  nonpayment  at  maturity  they  necessitate  a  forced 
sale  of  the  objects  pledged,  which,  in  the  case  of  merchan- 
dise, and  even  of  securities,  according  to  the  state  of  the 
market,  may  lead  to  poor  results  or  none  at  all,  if  there 
happens  to  be  a  simultaneous  sale  of  the  same  kind  of  mer- 
chandise or  securities,  or  a  slack  demand,  or  a  general 
unfavorable  condition  of  the  market.316 

The  fact  that  money  thus  advanced  is  tied  up  for  the 
period  agreed  on  is  another  circumstance  tending  to  make 
it  inadvisable  for  banks  to  invest  large  amounts  of  their 
depositors'  funds  in  the  lombard  business.  Further- 
more, the  objects  pledged  can  not  be  repledged,  except 


309 


National    Monetary     Commission 

by  special  agreement,  which  is  not  customary.  On  the 
other  hand,  bills,  or  at  any  rate  private  bills,  being  readily 
transferable  at  any  time  at  the  bourse  or  elsewhere,  repre- 
sent a  method  of  short-term  investment  which  is  much 
more  liquid,  that  is  to  say,  more  easily  realizable. 

This  difference  must  not  be  lost  sight  of  in  considering 
and  estimating  the  liquid  assets  of  banks.  At  any  rate 
the  investment  of  money  in  the  lombard  business  as  a  rule 
is  only  for  a  short  time,  limited,  in  the  practice  of  the  Ger- 
man credit  banks,  to  days,  weeks,  or  a  month,  while  credit 
in  the  way  of  bill  discounting  is  as  a  rule  granted  for  a 
longer  period,  since  bank  acceptances,  in  order  to  pass  as 
private  bills,  must  run  two  to  three  months. 

At  the  bourse  three  forms  of  lombard  loans  are  dis- 
tinguished : 

i .  Call  money  (Tdgliches  Geld) ,  payment  of  which  may 
be  required  at  any  time.  These  loans  are  mostly  made  by 
great  banks  or  bankers,  on  collateral  of  securities  or  bills, 
and  the  rate  of  interest  on  them  is  determined  by  supply 
and  demand  of  available  call  money  and  published  each 
day.  As  a  rule  this  rate  of  interest  is  below  the  rate  of 
private  discount  charged  on  two-months'  or  three-months' 
loans,  except  at  the  end  of  the  month  and  on  other  occa- 
sions of  strong  demand  for  money,  for  example,  when 
instalments  on  securities  issued  become  due.  However, 
despite  the  difference  of  periods  for  which  money  is  loaned, 
the  amounts  invested  in  lombard  call  money  and  in  short- 
term  private  bills  may  constantly  alternate  and  inter- 
change, according  as  the  lender  finds  the  rate  of  interest  in 
the  one  or  the  other  field  more  favorable  for  his  purpose, 
thus  making  the  rates  interdependent. 


310 


The     German     Great    Banks 

2.  (Ultimo  \oa.ns\(Ultimogeld) ,  granted  from  the  end  of 
one  month  to  the  end  of  the  next,  usually  at  a  rate  of 
interest  varying  with  the  existing  conditions  of  the  money 
market,  being  as  a  rule  lower  than  the  rate  of  contango 
money  and  below  the  Reichsbank  rate  of  interest  on  col- 
lateral loans,  but  higher  than  the  rate  of  private  discount. 

3.  Money  loaned  for  a  longer  but  fixed  term,  which  at 
the  Berlin  bourse  is  as  a  rule  furnished,  first  and  foremost, 
by  the  Seehandlung  (Prussian  State  Bank).     That  insti- 
tution, as  a  rule,  grants  lower  rates  of  interest  than  the 
bourse.     When  the  time  the  bills  have  to  run  agrees  with 
the  duration  of  the  lombard  loan,  the  Seehandlung,  in 
discounting  bills,  charges  the  same  rate  of  interest  as  in 
case  of  the  fixed-term  lombard  loan — that  is  to  say,  as  a 
rule  in  both  cases  the  rate  of  private  discount.     In  this 
point,  again,  it  differs  from  the  bourse.     On  the  other 
hand,  the  Seehandlung  is  more  exacting  than  the  bourse 
as  regards  the  quality  of  the  securities  pledged  and  the 
standing  of  the  borrowers.     At  the  bourse,  on  the  other 
hand,  the  rate  of  interest  for  ultimo  collateral. loans  is  as  a 
rule  higher  than  the  rate  of  private  discount,  but,  except 
in  case  of  strong  demand,  lower  than  the  Reichsbank  rate 
of  interest   on  collateral  loans.     The  latter,  too,  makes 
loans  only  on  certain  classes  of   paper  (art.  13,  No.  3b, 
of  the  bank  act) ,  and  the  limit  to  which  loans  are  allowed 
is  considerably  lower  than  at  the  bourse. 

The  opportunity  thus  offered  by  the  Seehandlung  of 
obtaining  favorable  rates  of  interest  is  taken  advantage 
of  by  the  great  banks,  which  are  able  to  comply  with  the 
severe  requirements  of  the  Seehandlung  as  regards  the 
standing  of  the  borrower  and  the  quality  of  the  collateral. 


National    Monetary     Commission 

The  usual  requirement  is  that  this  collateral  shall  consist 
of  domestic  or  foreign  government  bonds,  or  of  mortgage 
bonds,  but  it  may  also  consist  of  prime  bills,  which, 
having  already  been  indorsed  in  blank  by  the  banks  or 
their  customers  when  discounted,  do  not  have  to  be 
indorsed  again.  Thus  in  the  latter  case,  through  a 
wholly  unostentatious  use  of  bills  as  collateral,  a  form 
of  credit  is  created  which  the  great  banks  normally  use  in 
preference  to  rediscounting  private  bills  in  the  open  mar- 
ket; normally,  as  we  have  seen,  the  great  banks,  when 
they  cannot  avoid  a  step  of  this  sort,  prefer  to  redis- 
count long-term  private  bills  in  foreign  markets  or  among 
their  own  customers. 

Aside  from  the  above-mentioned  forms,  in  vogue  in  the 

lombard  business  at  the  bourse,  the  banks  grant  lombard 

\|loans  f°r  longer  terms,  up  to  three  months,  in  which  the 

llombard  rate  of  interest  is  fixed  by  agreement,  usually 

higher  than  the  rate  of  private  discount. 

The  ultimo  money  loaned  in  the  lombard  business  of 
the  bourse,  against  collateral  in  securities  or  bills,  is  used 
to  a  very  large  extent  by  speculators  in  securities,  either 
to  terminate  or  to  prolong  a  speculation,  provided,  of 
course,  that  they  possess  such  securities.  If  such  is  not 
the  case,  and  the  bull  speculator  (Haussier)  is  neverthe- 
less willing  to  continue  the  prolongation,  he  accepts  the 
securities  bought  as  per  ultimo,  obtaining  the  funds  for 
the  purchase  price  by  a  loan  on  collateral  repayable  on 
the  last  of  the  following  month,  for  which  he  has  to  pay 
the  usual  rate  of  interest  for  ultimo  loans  on  collateral, 
pledging  the  securities  accepted  and  buying  again  the 
same  securities  as  per  next  ultimo.  This  lombard  rate 


31* 


The     German     Great    Banks 

of  interest  will,  of  course,  be  the  higher  the  more  active 
the  bull  speculation  at  the  bourse. 

The  bull  speculator  may  use  another  method.  Having 
to  take  up  certain  securities  on  the  last  of  the  month,  he 
sells  them  to  a  third  party  (his  bank)  for  delivery  on  the 
last  of  the  month,  receiving  payment  or  being  credited  at 
the  so-called  settlement  price  (Liquidationskursus) .  Atjthe 
same  time  he  buys  back  the  same  securities  from  the 
third  party  at  the  same  price,  plus  the  so-called  report 
money,  as  per  ultimo  of  the  next  month.  The  amount 
of  this  charge  has  to  be  such  that  the  bank  shall  be 
compensated  for  the  month's  delay  in  receiving  back 
the  purchase  price  of  the  securities  pledged,  so  that  it 
has  to  receive  the  interest  for  the  intervening  period. 
The  rate  of  interest — that  is  to  say,  the  rate  of  the  report 
money — is  determined  by  the  market. value  of  each  indi- 
vidual security  or  in  percentages  of  the  face  value  (accord- 
ing as  the  security  itself  is  quoted  in  one  way  or  in  the 
other). 

On  the  other  hand,  the  bear  speculator — that  is  to  say, 
the  person  who,  expecting  a  fall  in  quotations,  has  sold 
securities  which  he  does  not  own,  for  delivery  on  the 
last  of  the  month,  but  does  not  wish  to  procure  them  on 
the  last  of  the  month  because  the  market,  instead  of 
falling,  has  risen,  or  is  not  in  position  to  procure  them 
because  he  has  no  money,  proceeds  as  follows:  He 
procures  the  securities  to  be  delivered  on  the  last  of  the 
month  by  buying  them  from  a  third  party  that  owns 
such  securities  (his  bank),  to  be  delivered  to  him  on  the 
same  date.  The  bank  thereupon  debits  him  with  the 
purchase  price  and  at  the  same  time  buys  the  papers 


313 


National    Monetary     Commissio 


n 


back  from  him  for  delivery  on  the  last  of  next  month, 
at  the  same  price,  with  deduction  of  the  monthly  interest 
to  be  calculated  according  to  the  method  above  indicated 
(the  so-called  deport).  The  greater  the  scarcity  of  se- 
curities on  the  last  of  the  month,  and  the  greater  there- 
fore the  need  for  them  on  the  part  of  the  bear  speculators, 
the  higher  will  be,  as  a  rule,  the  interest  which  the  owners 
of  the  securities  will  require  to  be  deducted  (deport), 
which  in  such  cases  may  thus  be  lower  than  the  rate  of 
lombard  interest  for  ultimo  loans  prevailing  at  the  same 
time. 

To  the  speculator,  all  these  cases  represent,  economi- 
cally, a  prolongation  of  his  speculation;  juridically,  in  the 
last  two  cases  (report  business)  the  combination  of  a  cash 
sale  with  a  purchase  for  delivery  (report)  or  a  cash  pur- 
chase with  a  sale  for  delivery  (deport). 

The  lender  in  such  case  is  simply  dealing  with  two  differ- 
ent methods  of  granting  credit,  that  is  to  say,  of  investing 
such  money  as  he  may  have  at  his  disposal  for  the  time 
being.  In  the  report  business  he  runs  somewhat  greater 
risk,  because  he  has  to  furnish  a  sum  of  money  exactly 
equal  to  the  quoted  value  of  the  security,  but  then,  as  a 
rule,  he  draws  somewhat  higher  interest,  for  as  a  rule  the 
'  report  money  is  higher  than  the  rate  for  ultimo  money  in 
ithe  lombard  business,  because  the  former  includes  a 
premium  for  risk. 

On  the  other  hand,  if  the  lender  furnishes  ultimo  money 
on  collateral  in  the  shape  of  securities,  he  runs  less  risk — 
a  matter  of  special  importance  to  the  owner  of  investment- 
seeking  funds — because  he  is  able  to  fix  the  amount  of  the 
loan  on  the  securities  according  to  their  quality,  not  being 


The     German     Great    Banks 

required  to  stake  his  money  on  them  to  the  full  amount 
of  the  market  value.  However,  since  the  rate  for  ultimo 
money  as  a  rule  is  lower  than  the_xate~ef- report  money, 
he  usually  draws  less  interest  than  in  the  report  business. 

From  the  point  of  view  of  both  the  speculator  and  the 
lender,  either  case  represents  either  intentionally  or  at  any 
rate  in  effect  a  fostering  of  speculation  in  securities, 
through  the  taking  or  granting  of  short-term  credit. 

Hence  the  increase  of  the  report  business,  especially  in 
case  of  a  boom,  is  as  a  rule  a  grave  symptom  of  a  decided 
increase  in  speculation.  Accordingly,  a  writer,  in  the 
"  Frankfurter  Zeitung"  justly  finds  no  cause  for  con- 
gratulation in  the  fact  that  in  the  case  of  10  banks  in 
Berlin  and  Frankfurt  the  sums  invested  in  the  report 
business  rose  from  148,550,000  marks  at  the  end  of  1892  to 
284,590,000  marks  at  the  end  of  1894, an  increase  of  nearly 
100  per  cent,  while  from  1888  to  1889  the  increase  was 
only  55  percent  (from  344,760,000  to  533,240,000  marks). 

The  great  banks  as  a  rule  will  not  act  as  brokers  for  those 
of  their  customers  who  wish  to  invest  money  in  reports, 
because  that  would  diminish  the  amount  held  in  current 
account  on  which  they  have  to  pay  but  slight  interest, 
while  they  themselves,  as  a  rule,  are  able  to  make  better 
use  of  their  depositors'  money  in  the  way  of  the  lombard, 
discounting  or  report  business. 

On  the  other  hand,  so  far  as  their  own  temporarily 
available  resources  are  concerned,  the  great  banks  invest 
heavily  in  the  two  forms  of  short-term  credit,  that  is  to 
say,  in  ultimo  loans,  whose  rate  of  interest  influences  also 
the  rate  of  private  discount,317  and  in  report  money.  In 
particular,  when  the  domestic  rate  of  interest  is  higher 


315 


O 


x      ^      g 
Vv  \\$r    l 

x 


National    Monetary     Commission 

than  abroad,  the  banks  often  invest  very  large  sums  of 
foreign  capital  in  report  loans,  although  in  such  cases  the 
borrower  has  to  assume  the  risk  of  a  variation  in  the 
exchange  rates. 

The  tax  on  the  report  business  to  the  full  amount  of 
the  transaction  stamp  (Umsatzstempel)  ,  based  on  the  com- 
bined amounts  of  sale  and  purchase,  led  to  the  result  that 
at  the  German  bourses  the  ultimo  loans  have  declined  in 
importance  in  the  lombard  business,  as  compared  with 
the  report  loan,  especially  since  the  rate  of  tax  applying 
to  the  report  business  might  also  be  applied  to  the  case 
of  the  ultimo  loan. 

This  result  was  rather  regrettable,  all  the  more  because 
lombard  loans,  unlike  report  loans,  have  not  one  and  the 
same  date  of  repayment,  and  because  the  pledges  by  which 
they  are  secured  cannot  as  a  rule  be  realized  as  easily 
as  the  securities  of  the  report  loans.  Finally,  the  con- 
ditions of  the  report  loans  are  typical,  established  once 
for  all  by  the  terms  of  the  bourse,  while  the  terms  of  lom- 
bard loans,  as  we  have  seen,  have  to  be  fixed  by  special 
agreement  applying  only  to  each  individual  transaction. 

Recently  similar  factors  have  been  operative  in  the 
same  direction.  By  the  federal  stamp  tax  law  of  June  3, 
1906  (schedule  4a,  sec.  4),  the  stamp,  tax  on  the  report 
business  has  been  reduced  to  one-half  of  the  former  rate, 
the  tax  being  based  on  the  more  highly  appraised  of  the 
two  transactions  into  which  the  report  business  is  jurid- 
ically divided.  On  the  other  hand,  the  so-called  im- 
proper lombard  business  (uneigentliches  Lombardgeschdft)  , 
in  which  the  recipient  of  the  securities  may  return  other 
securities  of  the  same  kind,  is,  according  to  the  practice  of 


3*6 


The     German     Great    Banks 

the  revenue  authorities,  subject  to  the  full  tax  according 
to  the  schedule.  Only  the  taxing  of  the  lombard  business 
proper,  of  little  importance  at  the  bourse,  in  which  the 
recipient  does  not  enjoy  the  right  referred  to,  is  subject 
to  the  law  of  the  individual  States.  In  Prussia,  accord- 
ing to  the  exemption  clause  to  schedule  58  of  the  stamp- 
tax  law  of  July  31,  1895,  the  documents  certifying  such 
lombard  loans  are  exempt  from  tax,  provided  that  they 
are  repayable  within  at  most  a  year  and  that  the  value 
of  the  security  given  is  at  least  equal  to  the  loan  granted. 

I/ombard  loans  on  the  security  of  bills  (which  there- 
upon are  not  further  indorsable)  with  the  view  of  granting 
but  not  of  securing  credit  play  a  very  unimportant  part 
among  the  operations  of  the  great  banks. 

The  former  bourse  law  naving  absolutely  prohibited  the 
dealing  in  futures  in  the  case  of  certain  securities  and 
greatly  hampered  it  in  the  case  of  others,  the  cash  busi- 
ness (Kassageschdft)  has  for  years  been  the  favorite  sphere 
of  speculation  in  securities  at  the  bourse,  the  bankers  of 
the  medium  and  smaller  class  having  to  resort  for  that 
purpose  extensively  to  call  money  in  the  lombard  business 
in  speculating  either  on  their  own  or  their  customers' 
account. 

The  terms  usually  charged  on  lombard  business  by  the 
great  banks  are  about  the  same  as  those  of  the  Berliner 
Handelsgesellschaft,  reprinted  below  from  W.  Prion's 
work.318  They  may,  of  course,  be  more  or  less  modified 
in  individual  cases,  the  lender  enjoying  considerable  lati- 
tude in  this  respect,  since  these  terms  merely  state  the 
maximum  amounts  of  loans  ("up  to"). 


317 


National    Monetary     Commissio 


n 


If  the  market  value  of  the  securities  no  longer  shows 
the  margin  agreed  on  as  compared  with  the  loanable 
value,  a  corresponding  additional  deposit  (Einschuss)  is 
to  be  furnished,  either  in  cash  or  in  securities.  The  dec- 
laration to  be  signed  by  customers  in  the  case  of  a  lom- 
bard  loan  (unless  the  conditions  of  the  current  account 
are  deemed  sufficient)  has  been  reprinted  by  Friedr. 
L-eitner  319  and  others. 

MAXIMUM  AMOUNTS  LOANABLE  ON  SECURITIES  QUOTED  AT 
THE   BERLIN   BOURSE. 

I.  Up  to  nine-tenths  of  the  quotation  of  the  day:  Bonds 
of  the  German   Empire  and  of    the   German  Federated 
States;  mortgage  bonds  issued  by  Prussian  mortgage  banks 
and  cooperative  credit  associations,  as  well  as  the  bonds 
of  German  cities  and  Prussian  counties  (Kreise) ;  bonds  of 
German  (other  than  Prussian)  mortgage  banks ;  stock  and 
debentures  of  nationalized  railways ;  bank  notes  of  foreign 
states;  gold  and  silver,  in  coin  and  in  bars;  debentures  of 
German  railways. 

II.  Up  to  four-fifths  of  the  quotation  of  the  day:  Bonds 
of  foreign  governments  and  cities;  foreign  railway  bonds; 
foreign  farm  and  real  estate  mortgage  bonds ;  German  rail- 
way shares. 

III.  Up  to  three-fourths  of  the  quotation  of  the  day: 
Foreign  railway  shares;  bank  shares. 

IV.  Up  to  two-thirds  of  the  quotation  of  the  day :  De- 
bentures of  industrial  concerns  quoted  at  not  less  than  90 
per  cent.     Shares  of  industrial  concerns  quoted  at  not  less 
than  150  per  cent;  if  the  quotation  is  higher,  the  excess 
above   150  per  cent  is  loaned  on  only  to  one-half  the 


318 


The     German     Great    Banks 

amount  and  with  the  restriction  that  the  loan  is  not  in 
any  case  to  exceed  150  per  cent  of  the  face  value.  Secu- 
rities quoted  more  than  20  per  cent  below  par  are  not 
accepted  as  collateral.  Mining  shares  and  securities  not 
quoted  at  the  Berlin  Bourse  are  loaned  on  only  under 
special  agreement. 

According  to  the  official  statement  submitted  to  the 
Bank  Inquiry  Commission  under  date  of  March  31,  1908, 
the  sum  total  of  lombard  loans  of  the  Reichsbank  (on 
5,650  pledge  receipts)  amounted  to  255,687,100  marks, 
distributed  as  follows : 

Marks. 

1.  Agriculture  and  allied  industries  (249  receipts) i,  803,  300 

2.  Industry  and  trades 17,  853,  600 

3.  Commerce,  transportation,  and  insurance 21,  562,  800 

4.  Banking  and  finance,  viz. : 

(a)  Joint-stock  banks  32° 99,  618,  900 

(b)  Other  financial  institutions  .  .  . 88,  422,  ooo 

5.  Public  savings  banks 12,  620,  500 

6.  Cooperative  credit  societies  of  all  kinds 5,  108,  900 

7.  Private  persons 5,  788,  700 

8.  All  others  (corporations,  foundations,  etc.) 2,  908,  400 

Total 255,  687,  loo 

The  exhibit  shows  also  how  greatly,  in  the  transactions 
of  the  Reichsbank,  the  lombard  business  is  eclipsed  by  the 
discount  business,  a  result  due,  no  doubt,  in  part  to  the 
fact  that  lombard  loans  are  not  permitted  to  be  used  as 
reserve  for  notes. 

In  1907,  as  was  shown  (p.  297),  the  average  of  domestic 
bills  held  by  the  Reichsbank  was  1,060,076,000  marks, 
while  during  the  time  from  December  31,  1907,  to  April  7, 
1908,  the  Reichsbank  bought  1,389,357  domestic  bills  to 
the  amount  of  2,897,985,044  marks. 


319 


National    Monetary     Commission 

Unfortunately,  in  the  German  bank  balances  lombards 
have  hitherto  been  for  the  most  part  combined  with  ' '  re- 
ports "  (under  the  head  "  lombards  and  reports  "  or  merely 
"lombards"  or  "reports")  in  one  total.  This  is  all  the 
more  incorrect,  because,  although  both  kinds  of  invest- 
ment represent  as  a  rule  forms  of  short-term  credit, 
lombards  occasionally  run  for  longer  periods  (up  to  three 
months).  Furthermore,  although  in  many  respects  the 
two  kinds  of  investment  serve  the  same  purposes,  yet,  as 
we  saw,  there  are  essential  differences  in  these  purposes  as 
well  as  in  the  nature  of  the  investments. 

As  regards  the  composition  of  the  "  reports,"  such  an  ex- 
pert as  Felix  Hecht321  has  justly  pointed  out  that  they  may 
include  securities  not  easily  realized,  and  furthermore  se- 
curities issued  by  the  banks  themselves  and  sold  on  credit 
to  their  customers.  However,  the  same  may  be  true  of  the 
lombards. 

Again,  in  the  balance  sheets  and  reports  of  the  credit 
banks  (with  the  exception  of  some  great  banks)  it  has  hith- 
erto to  a  large  extent  been  the  practice  to  make  no  differ- 
ence between  lombard  loans  on  merchandise  relating  almost 
exclusively  to  articles  the  prices  of  which  are  quoted  in  the 
market  or  at  the  bourse  and  lombard  loans  on  securities, 
the  latter  including  also  securities  not  quoted  at  the  bourse 
or  securities  issued  by  banks  but  not  yet  listed  at  the 
^bourse.  However,  in  the  bimonthly  summary  balances 
since  published  by  the  great  banks  (beginning  with  Feb- 
ruary 28,  1 909),  the  "advances  on  merchandise  and  ship- 
ments "  are  separately  stated,  and  hence  it  may  be  assumed 
that  the  same  will  be  done  hereafter  in  the  annual  bal- 
ance statements.  At  the  same  time  the  combination  of 


320 


The     German     Great  'Banks 


"reports  and  lombards"  into  one  item  has  been  retained, 
probably  on  account  of  the  practical  difficulties  that 
would  be  involved  in  their  separation. 

Finally,  some  credit  banks  were  accustomed  formerly 
to  record  advances  on  merchandise  under  the  head  of 
" secured  loans  in  current  account"  (gedeckte  Debitor eri). 

Thus,  in  studying  past  records,  we  have  to  bear  in  mind 
that  in  the  balance  sheets  of  most  banks  the  two  items 
were  lumped,  and  thus  the  growth  of  lombards  and  reports 
for  the  four  great  Berlin  banks  stated  below  (in  millions 
of  marks)  can  be  traced  only  for  the  two  items  combined: 

DEUTSCHE    BANK. 


1870.  . 

2.  7   1880 

26.  2 

1800. 

4O.  7 

IQOO 

6q  4. 

1871  .  . 

/ 

13.  2 

1881 

.  ^2.  S 

A  ^yv^  .    .  . 

1891  . 

T"     / 
26.  I 

A  V^V-rv-»  .  . 

IQOI 

•  •   vy-  **• 

08  7 

1872  

A  O  •  *" 

19.9 

1882 

O1**  •  O 

29.  8 

1892.  .  . 

43-6 

A  v^V^  A  .  . 

I9O2  .  . 

•  •    yw»  ^5 

..  184.6 

1873  

8.7 

1883 

30.  6 

1893-  •• 

34-3 

1903.  . 

.  .  184.0  > 

1874 

14.  «? 

1884. 

-24.  8 

l8Q4. 

69.  8 

IQO4. 

IQO  4. 

XCJ  /T-  •  • 

A4"  O 

16.  4 

A  t-JOif. 

1885 

....  jij..  u 

II.  2 

VT~  •   •  • 

i8gs. 

60.8 

±  y  vjij.  .  . 
I  90S  •  • 

•  •  »»^»«  *|- 

.  238.  7  t 

1876 

^2  2 

1886 

7  O 

1806 

68  Q 

y  O 

1906  . 

~O^'*  / 

227  "^ 

i<J  /  u  

l877 

O   ~ 
II.  O 

1887 

.  10  8 

A  LJV^VJ  .     .  . 

1807 

W<J.  v./ 

IOI.  2 

IQO7 

•  •^/'  O 

I  S4.  Q 

•'•*-'//  

1878. 

ICC 

i  <J<J  y 

1888 

.  47.  I 

A  «_>V_f  y  .     .   . 

l8q8 

1  14  I 

A  yw/ 
1008 

•  •  *OT*  V 

222.  I 

***/**•  

1879  

O  O 

34-8 

1889 

66.  i 

A  *_JV^*J  .     .   . 

I899.   .. 

A  AiJ..   A 

103-5 

A  \^V^tJ  .  . 

DISCONTO-GESEU,SCHAFT 

^y 

1870  

7.6 

1880 

24.  8 

1890.   . 

31-9 

I9OO.  . 

..  S..68' 

1871  

8.4 

1881 

29.5 

1891.   . 

I4.9 

I9OI  .  . 

••  31-  as 

1872  . 

37-8 

1882 

.  12.  S 

l8O2 

114 

IQO2 

49 

1873  

O  / 

16.  i 

1883 

•*•  ^  '  \j 
18.  2 

*  ^  V   • 

1893-  • 

A  A  .  £f. 

18.  6 

A  y\J4>  .  . 
1903.  . 

••   580US 

1874  

14-5 

1884 

45-i 

1894.  - 

48.6 

1904.. 

••73 

.6 

1885 

26.  8 

l8qs  . 

36.  o 

IQOS  - 

381  ot 

1876".  

O 

1886 

31.  3 

•  ^^o 

1896.  . 

"   * 

ov^ 
23.  3 

;/  O 

1006  . 

CY. 

1877 

2.  I 

1887 

IO  2 

1807 

o  o 

27  4, 

;7    •  • 
IQO7 

o  /    *• 

4.0'  OI 

1878 

C   -7 

A  tjtj  ^ 

1888 

T.C.  T. 

j.«jy  y  . 
I8O8 

•*  /  •  T- 

•y**/  •  • 

IQO8 

•  •  T-V  v* 

S8 

r  **  /  w  

1870.  . 

O  O 

14.  7 

1880 

T.A,  7 

A  <_jy  CJ  .  *  . 

T«00 

4.0  6 

A  yv^u  .  . 

i  in 

Pwf  3r* 

T^   /      ;7 

DRESDNER  BANK. 

T.W.  W 

tion 

1873.  . 

o.  4 

1882 

12.  O 

I  8O  I  .  . 

21.6   Toon. 

pur- 

1874  

•  7 

1883 

15-  I 

w:7  x  *  •  " 

1892.  .  .  . 

33-0 

I9OI  . 

••  v^iank 

1875? 

i.  i 

1884. 

IQ  I 

180^ 

28  Q 

I9O2  . 

'"*'•  V  7f      J.*V 

*  ^  /  O  

1876.  . 

1.6 
1.9 

A  UtJiJ- 

1885 
1886 

*jr<  * 

C.  Q 

A  U*-f  ^  .  •  .  • 

1894.... 
1895.... 

*w*  V 

54-2 
49.9 

1903. 
1904. 

•  f  acqui- 

1877  

J   J 
15-3 

1878  

2.7 

1887 

9-6 

1896.  .  .  . 

42.3 

1905.. 

.  ibernia- 

1879  
1880  

5-4 
4.  i 

1888 
1889 

37-8 
59-6 

1897.... 
1898.  .  .  . 

51-8 
57-6 

1906. 
1907. 

Prussian 

1881  

22.5 

1890 

38.2 

1899  

73-8 

1908 

90311"— II- 


321 


National    Monetary     Commission 


DARMSTADTER   BANK. 


1870 

2  O 

1880  . 

•  10.  3 

1800.  . 

27.  6 

iqoo 

27  6 

1871  
1872  . 

7-9 
14.  7 

1881.  .  . 
1882.  .  . 

•  25.3 
.  .  24.  8 

1891  .... 
1892.  .  .  . 

22.7 
.  27.6 

1901  .  .  . 
iqO2  .  . 

.  .  .  19.0 
.  ^8.  q 

187^ 

jc  -J 

188-? 

31.  3 

i8cn 

24  I 

IQO7 

•77   Q 

1874. 

Q  6 

1884. 

•  ^4-  0 

1804 

•  30.  =; 

IQO4 

AC.  7 

187=; 

IO.  ^ 

1885.  .  . 

.  .  24.  6 

l8qs  . 

31.4 

iqCK 

72  2 

1876  

1877  
1878  

1870.  . 

7.6 

8.9 
18.5 

28.0 

1886..  . 
1887.  .  . 
1888.  .  . 
1880.  . 

.  .  22.9 
.  .  26.  8 
•  •  39-7 

.  41.  O 

1896  
1897.... 
1898.  .  .  . 
l8qq.  . 

•  30.5 

.  23.  i 

•  32-3 

.  •}!.  O 

1906.  .  . 
1907.  .  . 
1908.  .  . 

•••  73-3 
...  48-5 
...  65.2 

•<_*  For  all  the  German  credit  banks  (with  a  capital  of  at 
least  1,000,000  marks  each),  the  lombards  and  reports 
during  the  last  eleven  years  amounted  to  the  following 
sums  (in  millions  of  marks)  • 


n 


1898 668.  8 

1899 736.8 


1900. 


ct]90i 


597- 
594- 


1902 

1903 

1904 

1905 


691.  5 

708.  2 

773.9 

970.  9 


1906 

1907 
1908 


1,099.  4 
i,  162.  6 
i,  348.  5 


to    At  the  six  great  Berlin  banks  the  lombards  and  reports 
lomring  the  last  eleven  years  amounted  to  the  following 
Ams  (in  millions  of  marks) : 


'8 


erto 


415.6 
463.  i 
302.0 


1901 . 

1902 . 
1903. 


294-3 
432.0 

443-o 


1904 477.8 

1905 588.3 

1906 679.3 


1907 594.4 

1908 660.  8 


encei 

,  ^f  the  total  assets  the  following  amounts  (in  millions 

*    i  narks)  were  invested  in  lombards  and  reports: 


the  la 
or  cspr 

i8< 

18 

35- 

19 

D8. 

^bourst 

Amount  . 

Per 
cent. 

Amount  . 

Per 
cent. 

Amount  . 

Per 
cent. 

since 

'".  Deutsche  Bank  

69  7 

15  .  19 

60.  7 

10.  50 

222.  12 

ruary   Disconto-Gesellschaft.  . 
,  ^resdner  Bank  
vrmstadter  Bank  .... 

that  the  rliner  Handelsse- 

48.5 
54-0 
30.4 

21  .  I 

15.  20 
20.  08 
15.  20 

12.  93 

36.  o 
49-8 
31-  4 

25  .  o 

9.67 
14-77 
15-09 

12.  50 

58.  10 

II3-8 
65-  29 

53  •  4° 

6.5 
10.  9 
9-6 

12 

ance  statei, 

322 


The     German     Great    Banks 

(F)   THE  BROKERAGE  BUSINESS    (Kommissionsgeschdft). 

The  brokerage  business  of  the  German  credit  banks, 
especially  of  the  great  banks,  has  never  remained  con- 
fined within  the  narrow  scope  assigned  to  the  broker 
(Kommissiondr)  by  paragraph  383  of  the  Commercial 
Code  (Handelsgesetzbucti) ,  according  to  which  the  term 
broker  (Kommissiondr)  designates  exclusively  a  person 
who  makes  a  business  of  buying  and  selling,  in  his 
own.  name  but  for  another's  account,  merchandise  and 
securities. 

On  the  contrary,  the  German  credit  banks  have  from 
the  beginning  also  engaged,  in  their  own  name  and  for 
other  persons'  accounts,  in  business  not  consisting  of  the 
purchase  and  sale  of  merchandise  or  securities,  but 
which  are  nevertheless  subject  to  the  legal  provisions 
regulating  the  brokerage  business,  according  to  the  present 
Commercial  Code  (art.  406). 

As  instances  of  such  operations,  the  following  may  be 
enumerated:  The  payment  of  the  indemnity  to  Spain  by 
the  United  States  for  the  cession  of  the  Philippines, 
effected  through  the  mediation  of  the  Deutsche  Bank,  as 
set  forth  by  Ad.  Weber;322  the  cooperation  of  various 
great  German  banks  in  the  preparation  and  execution  of 
the  nationalization  of  the  private  railways,  first  those  of 
Prussia  and  later  those  of  other  German  States,  begun  in 
1879  and  continued  for  several  years,  a  cooperation 
which  was  very  extensive  and  not  confined  to  the  pur- 
chase of  shares ;  the  cooperation  of  the  Dresdner  Bank 
and  the  A.  Schaaffhausen'scher  Bankverein  in  the  acqui- 
sition of  an  adequate  amount  of  stock  of  the  Hibernia- 
Gesellschaft,  undertaken  at  the  instance  of  the  Prussian 


323 


National    Monetary     Commission 

Government,  and  again  not  limited  to  the  purchase  of 
stock;  the  cooperation  of  the  Disconto-Gesellschaft  in  the 
settlement  of  the  French  war  indemnity  in  1871-72;  the 
mediation  of  the  Disconto-Gesellschaft  in  the  conversion 
of  the  stock  of  the  Roumanian  Railway  Company  into 
Roumanian  government  bonds  (1879-1881);  the  reor- 
ganization of  the  Northern  Pacific  Railroad  Company 
effected  by  the  Deutsche  Bank,  partly  on  account  of 
third  parties,  etc.  In  the  main,  however,  the  business 
carried  on  by  the  credit  banks  and  especially  the  great 
Danks  is  the  brokerage  business  proper,  conducted  on  the 
bourse.  The  scope  of  this  business  has  been  enlarged  by 
all  the  numerous  factors  tending  toward  an  increase  of 
power  and  concentration,  some  of  which  we  have  already 
mentioned,  while  others  yet  remain  to  be  discussed. 
Such  are  especially  the  relations  to  industry,  constantly 
growing  more  intimate,  and  the  deposit  offices  estab- 
lished gradually  in  large  numbers  by  all  the  great 
banks,  with  the  exception  of  the  strictly  centralized  Ber- 
liner Handelsgesellschaft.  For  although  Waldemar  Miil- 
ler323  may  be  right  in  stating  that  the  business  of  the 
deposit  and  exchange  offices  (W echselstuberi) ,  "so  long 
as  it  was  confined  to  the  use  of  interest  and  the  commis- 
sion business  in  securities,  did  not  cover  the  considerable 
expenses  for  rent,  personnel,  etc.,"  yet  the  originators  of 
these  deposit  offices  acted  on  the  expectation  that  the 
•  \makers  of  the  deposits  and  the  users  of  their  safes  would 
little  by  little  tend  to  utilize  the  other  facilities  of  the 
offices  for  arranging  all  their  business  and  property  mat- 
ters, especially  investments  of  capital,  that  is  to  say, 
entrust  them  with  the  brokerage  of  their  bourse  transac- 


324 


The     German     Great    Banks 

tions.  This  assumption,  founded  on  the  desires  and  wants 
of  their  clientele,  has  in  the  main  proved  well  founded, 
as  well  as  the  further  expectation  that  the  clients  of  the 
deposit  branches  would  also  little  by  little  become  habitual 
and  trustworthy  customers  for  the  securities  issued  by 
the  central  offices,  their  financial  standing  and  solvency 
being  well  known  to  the  local  offices. 

The  deposit  branches  have  often  been  criticised  as  tend- 
ing to  encourage  to  a  considerable  extent  speculation  in 
securities  on  the  part  of  their  customers,  and  to  urge  the 
participation  of  customers  in  bourse  speculations,  after 
the  manner  of  " touting  bankers"  (Animierbankiers) .  It 
would  be  difficult  to  prove  the  justice  of  this  criticism. 
As  a  matter  of  fact,  the  central  authorities  of  the  great 
banks  and  of  the  other  credit  banks,  in  view  of  article 
94  of  the  bourse  law,  as  well  as  from  an  intelligent  regard 
for  their  own  interest,  have  from  time  to  time  issued  the 
strictest  instructions  to  the  managers  of  their  deposit 
branches  and  exchange  offices  to  refrain  from  encouraging 
bourse  speculation  on  the  part  of  their  customers  or 
others.  These  instructions  are  periodically  repeated. 
It  can  not  be  doubted,  however,  that,  notwithstanding  all 
instructions  and  warnings,  certain  managers  of  deposit 
branches  have  offended  in  this  respect.  This  is  likely 
to  occur  again,  especially  in  the  case  of  those  managers 
who,  besides  their  salary,  draw  a  commission  merely  from 
the  net  profits  of  their  deposit  branches,  a  practice  which 
it  would  be  well  to  discontinue.  It  must  not  be  forgotten, 
however,  that  the  public  and  the  customers  themselves 
often  dictate  to  the  managers,  and  not  only  resent  every 
exhortation  or  warning,  but  issue  their  orders  in  peremp- 


325 


National    Monetary     Commission 

tory  form.  It  may  also  happen  that  the  speculators, 
without  the  knowledge  of  the  manager  of  one  deposit 
branch,  enter  into  speculative  enterprises  with  other 
deposit  branches  and  use  the  knowledge  gained  at  one 
branch  either  to  check  the  other  or  for  conclusive  action, 
beyond  the  control  of  the  first  manager. 

Withal,  the  aim  of  these  deposit  branches  and  exchange 

I  offices  must  be  to  minister  solely  to  the  legitimate  invest- 

\ment  of  funds  and  to  the  other  needs  of  their  customers, 

as  they  arise  in  the  course  of  business,  and  to  cultivate  all 

the  branches  of  the  regular  (current)  bank  business,  with 

the  exception  of  the  security  issue  business  and  the  security 

business  for  own  account.     To  their  credit  it  must  be 

said   that   a   growing  portion  of   these   establishments, 

especially  the  older  ones,  have  been  following  the  policy 

just  commended. 

Extreme  caution  must  be  practiced  in  the  investment 
business,  both  as  regards  the  securities  issued  by  the 
banks  themselves  and  other  securities.  It  can  not  be 
maintained  that  this  caution  has  always-  been  sufficiently 
observed  in  the  past.  In  particular  it  ought  to  be  laid 
down  as  a  principle  that  those  persons  who  are  compelled 
by  their  financial  situation  to  follow  anxiously  every 
oscillation  in  quotations  and  who  are  severely  affected 
by  every  diminution  in  interest  income  should  not  be 
advised  to  invest  in  dividend-paying  securities,  because 
these  are  subject  to  great  fluctuations  not  only  as  to  divi- 
dends but  also  as  to  the  market  value,  corresponding  to 
the  fluctuating  rate  of  dividends.  On  the  other  hand, 
those  persons  who  insist  on  acquiring  dividend-paying 
paper,  either  because  of  speculative  tendencies  or  of  their 

326 


The     German     Great    Banks 

needs  of  seeking  higher  returns  than  are  usually  offered 
by  government  bonds  and  other  securities  bearing  a  fixed 
rate  of  interest,  would  do  well  at  any  rate  to  "mix,"  that 
is  to  say,  to  buy  small  amounts  of  safe  stock  of  various 
industrial  enterprises,  in  order  not  to  stake  everything  on 
one  card.  The  better  returns  in  one  branch  of  industry 
or  in  one  company  will  then  offer  them  a  kind  of  insurance 
against  diminished  returns  in  other  companies.  The 
principle  of  the  distribution  of  risk  applies  also  to  the 
private  capitalist,  and  it  is  the  duty  of  managers  of 
deposit  branches  to  exert  their  influence  in  this  direction, 
whenever  their  advice  is  asked. 

Aside  from  these  cases,  it  is  the  practice  among  the 
managers  of  the  great  banks,  so  far  as  I  know,  to  instruct 
the  managers  of  deposit  branches  and  exchange  offices, 
though  not  always  with  success,  to  abstain  from  all  recom- 
mendations and  advice  beyond  a  mere  statement  of  facts 
within  their  knowledge  regarding  the  securities  to  be 
bought  or  sold,  especially  when  such  securities  have  been 
issued  by  the  great  banks  themselves,  since  in  such  case 
the  very  fact  of  issue  expresses  the  favorable  opinion  of 
the  issuing  bank.  When  customers  ask  for  information, 
it  is  the  branch  bank  manager's  duty  to  point  out  to  them, 
to  the  best  of  his  knowledge,  those  factors  which,  after 
careful  examination,  he  thinks  will  be  apt  to  determine 
the  intrinsic  value,  safety,  prospective  yield  and  market 
of  the  securities  to  be  purchased  or  sold,  including  in  the 
appropriate  case,  the  conditions  under  which  they  are  ad- 
mitted to  trading  at  the  bourses  at  home  or  abroad.  He 
should  on  principle  decline  to  utter  any  prognostications 
regarding  the  future  development  of  the  market  value,  no 


327 


National     Monetary     Commission 

matter  how  urgent  the  questions  which  are  almost 
always  addressed  to  him  on  this  point.  This  caution  is 
especially  demanded  in  view  of  the  fa'ct  that  the  very 
shrewdest  experts  in  the  money  market,  possessing  the 
most  minute  knowledge  of  the  innumerable  factors  that 
influence  the  market  value,  profess  to  be  unable  to  lay 
down  any  rule  as  the  result  of  their  experience,  except 
that,  as  they  say  at  the  bourse,  "it  always  turns  out 
the  other  way." 

In  the  brokerage  business  at  the  bourse,  the  Berlin 
great  banks  324  and  a  wide  circle  of  other  establishments 
are  guided  by  certain  "business  regulations,"  which  in  the 
main  are  identical,  as  shown  by  the  printed  blanks.  They 
embody  the  following  principles: 

1 .  All  orders  given  to  the  bank  for  the  purchase  or  sale 
of  bills,  foreign  bills  of  exchange  (Valuteri),  or  securities 
are  executed  by  the  bank  in  its  own  name,  unless  the 
contrary  is  expressly  agreed  on,  or  unless  the  bank  itself 
in  the  individual  case  makes  an  express  statement  to  the 
contrary.325     Any  phrases  used  in  the  transaction,  such  as 
"  I  bought  or  sold  for  you,"  that  might  indicate  an  agree- 
ment with  a  third  party,  do  not  alter  this  rule.     In  each 
instance  the  bank  has  the  right  to  charge,  in  addition  to 
the  commission,  the  regular  expenses,  especially  the  usual 
brokerage  (Kurtage)  and  stamp  tax.326 

2.  Any  bourse  transaction  undertaken  by  the  bank  for 
its  customers  is  subject  to  the  rules  in  force  at  the  time 
in   that   kind   of    business   at    the   domestic   or   foreign 
bourse  where  the  transaction  is  to  be  executed,  even  when 
the  business  is  transacted  by  the  bank  in  its  own  name. 
The  bank  has  the  right  to  prolong  term  engagements 


328 


The     German     Great    Banks 

made  at  the  bourse,  if  it  sees  fit,  or  to  cancel  them  entirely 
or  in  part,  unless  the  customer  gives  explicit  modifying 
orders  regarding  the  pending  engagement,  which  order 
must  be  received  at  the  latest  on  the  last  but  one  exten- 
sion day — the  so-called  day  of  premium  declaration  (Prd- 
mienerklarungstag) .  The  bank  has  the  same  right  of  can- 
cellation before  this  term,  if  the  person  giving  the  order 
fails,  on  demand,  to  pay  such  supplementary  margin 
(Einschuss)  as  may  be  required  (see  No.  3,  below,  second 
paragraph)  ,327 

3 .  In  order  to  safeguard  all  claims  against  the  customer 
through  the  current  business  connection,328  as  well  as  for 
any  bill  obligation  that  may  be  pending  (unless  a  special 
arrangement  has  been  made),  the  bank  has  the  right  of 
pledge  or  retention  in  regard  to  any  securities,  including 
interest  coupons,  annuity  (Rentenscheine)  and  profit-share 
certificates,  and  all  other  valuable  paper  which  may  have 
come  into  its  possession  or  keeping  in  the  course  of  busi- 
ness or  in  any  other  way.329  However,  if  such  securities 
are  turned  over  to  the  bank  expressly  in  the  name  or  on 
account  of  other  persons,  the  bank  possesses  the  right  of 
pledge  or  retention  in  virtue  of  those  claims  only  which 
may  have  arisen  in  connection  with  the  respective  securi- 
ties.330 Securities  deposited  in  German  banks  without 
being  provided  with  a  German  stamp  are  not  subject  to 
the  right  of  pledge  and  retention.331 

If  the  margin  (Einschuss)  or  the  balance  due  the  bank, 
including  any  pending  bill  obligations,  is  not  paid  when 
due,  a  written  demand  for  it  is  sent  by  registered  mail. 
If  this  remains  without  effect,  the  bank,  in  order  to  satisfy 
its  claims,  has  the  right,  without  further  warrant  or  period 


329 


National    Monetary     Commission 

of  grace,  to  sell  the  pledges  at  any  time  and  place  in  accord- 
ance with  the  provisions  of  articles  1221  and  1235  of  the 
civil  code.332  Article  1237,  section  2,  and  article  1238  of 
the  civil  code  are  not  applicable  to  this  case.  Neither 
has  the  customer  the  right,  according  to  article  1246  of 
the  civil  code,333  to  require  any  departure  from  the  regular 
form  of  sale  of  the  pledge. 

The  demand  just  mentioned  is  deemed  to  have  been 
delivered  if  it  is  sent  by  registered  mail  to  the  last  address 
known  to  the  bank,  even  if  the  letter  comes  back  marked 
"Can  not  be  delivered. " 

The  acquisition  of  the  pledged  object  by  the  broker  him- 
self is  permitted,  according  to  article  400  of  the  commer- 
cial code,  only  in  the  case  of  goods  which  have  a  market 
or  exchange  price  and  in  the  case  of  securities  which  are 
officially  quoted;  the  broker  has  to  prove  that  the  price 
]f  which  he  charged  to  the  client  is  the  market  price  pre- 
vailing at  the  time  of  the  execution  of  the  order;  this 
time  is  the  date  ' '  at  which  the  broker  delivered  the  notice 
of  the  execution  for  forwarding  to  the  client"  (art.  400, 
sec.  2,  paragraph  2  of  the  commercial  code),  a  provision 
which,  like  a  number  of  others  (articles  387,  400,  sees.  3b 
and  5;  articles  401,  405,  sec.  2),  is  intended  to  prevent 
the  so-called  "Kursschnitt" — that  is  to  say,  speculation  by 
the  broker  to  the  detriment  of  the  client. 

As  a  wilful  contravention  of  article  400,  section  2,  para- 
graph 2,  is  subject  to  penalty  (according  to  article  95,  sec. 
i ,  No.  2  of  the  bourse  law) ,  most  of  the  great  banks  have 
established  a  special  bureau  whose  duty  it  is  to  see  that 
the  law  is  strictly  observed  by  their  representatives  at 


330 


The     German     Great    Banks 

the  bourse.     This  or  some  other  bureau  also   makes  sure 
that  the  proper  stamps  are  used. 

According  to  articles  3  and  4  of  the  law  "  relating  to  the 
duties  of  business  men  (Kaufleute)  in  the  safe-keeping  of 
securities  belonging  to  third  parties"  of  July  5,  1896  (the 
so-called  bank  deposit  law) ,  the  broker  who  carries  out  an 
order  for  the  purchase  of  securities  (of  the  kind  specified 
in  art.  i)  is  bound  to_send  to  his  client  within  three  days 
a  list  of  the  items  purchased,  with  indication  of  the  nomi- 
nal value,  the  numbers,  and  any  other  marks  of  distinction 
(Stuckeverzeichnis — itemized  statement) .  According  to  the 
business  regulations  of  the  great  banks,  and  most  of  the  I 
German  credit  banks,  however,  the  banks  as  a  rule  require  L>*^ 
of  their  clients  a  written  waiver  of  the  sending  of  the  item- 
ized statement  in  case  the  securities  purchased  have  not  \ 
been  fully  paid,  and  the  client  remains  indebted  to  the 
broker  for  the  rest,  the  purchased  paper  being  left  as  pledge 
in  the  custody  of  the  broker.  The  business  regulations 
expressly  state  that  the  object  of  this  waiver  is  to  prevent 
the  passing  of  legal  title  in  the  purchased  securities  to  the 
client,  which,  according  to  article  4  of  the  bank  deposit  law, 
would  be  the  effect  (at  the  latest)  of  the  sending  of  the 
itemized  statement.  As  it  is,  however,  the  broker — that  is 
to  say  the  bank — retains  title  until  the  purchase  price  has 
beeaiully  paid.  Until  this  is  done,  the  items  purchased  are 
not  credited  to  the  deposit  account  of  the  client  and  do 
not  become  his  property.  Accordin^lvjjjjey^age-^ftot  kept, 
on  behalf  of  the  client,  separate  from  the  bank's  own  hold- 
ings or  those  of  third  parties,  and  are  not  entered  in  the 
deposit  book  according  to  their  distinctive  marks  (art.  i  of 
the  bank  deposit  law) .  On  the  contrary,  they  are  booked 

331 


National    Monetary     Commission 

by  the  piece  without  indication  of  number,  this  record  be- 
ing often  known  in  the  great  banks  by  the  name  of  Account 
C  (Konto  C) ,  in  contradistinction  to  the  custody  account, 
pure  and  simple,  of  the  items  belonging  to  the  client 
(provincial  banker)  himself  (Deposit  Account  A),  and 
Deposit  Account  B.  The  latter  comprises  the  items  in 
regard  to  which  the  provincial  banker  (the  client  of  the 
great  bank)  making  the  deposit  or  transmitting  an  order 
for  purchase  has  made  the  declaration  (in  compliance 
with  art.  8  of  the  bank  deposit  law)  that  the  items  are  the 
property  of  others  or  that  the  purchase  is  to  take  place 
for  the  account  of  others.  This  Deposit  B,  therefore,  is 
"not  free;"  that  is  to  say,  it  does  not  serve  the  bank  as 
security  for  all  its  claims  against  the  provincial  banker. 
In  order  that  the  broker  (the  central  banker)  may  dispose 
of  items  booked  under  Deposit  Account  B,  it  is  necessary 
in  all  cases,  according  to  legal  decision,  that  the  client 
(the  provincial  banker)  shall  have  declared,  that  he  in 
turn  had  been  given  express  consent  to  such  disposition. 

According  to  article  3,  section  2  of  the  banking  law,  the 
waiving  of  the  requirement  of  an  itemized  statement 
(Stuckeverzeichnis)  may  be  done  by  bankers  in  any  form, 
even  verbally,  and  once  for  all,  but  in  the  case  of  persons 
who  are  not  bankers  only  expressly334  in  writing  and  only 
for  each  individual  case. 

Only  when  the  remainder  of  the  purchase  money  has 
been  paid,  the  purchased  items,  on  demand  of  the  client, 
are  transferred  from  the  item  account  (Account  C)  to 
the  Deposit  Account  A. 

As  regards  the  method  of  keeping  securities  booked 
under  or  transferred  to  Deposit  Account  A,  the  great 


332 


The     German     Great    Banks 

banks  as  a  rule  adopt  the  arrangement  by  classes,  that  is 
to  say,  securities  of  the  same  kind  but  belonging  to  differ- 
ent customers  are  kept  together,  the  items  belonging  to 
any  particular  customer  being,  of  course,  marked  by  bands 
bearing  the  customer's  name  and  the  nominal  value  of  the 
items.  This  method  of  keeping  by  classes  enables  each 
item  to  be  found  more  readily  and  is  therefore  preferred 
to  the  method  of  keeping  all  the  securities  belonging  to 
one  customer  in  a  portfolio  marked  with  his  name.  At 
the  same  time,  for  the  purpose  of  having  a  check  on  the 
holdings,  all  banks  carry  both  " living"  account  books,  in 
which  each  customer  has  one  account  for  all  his  securities, 
and  a  "  dead  "  account  book  in  which  each  class  of  securi- 
ties has  an  account,  the  names  of  the  customers  being 
entered  under  each  class,  with  the  items  of  that  class 
standing  in  their  names. 

In  the  case  of  mere  safe-keeping  of  securities,  or  where  an 
order  for  purchase  is  followed  by  safe-keeping,  many  pro- 
vincial banks  and  private  bankers  are  in  the  habit  of  ob- 
taining from  the  customer  an  authorization  to  return  secu- 
rities of  equal  value  in  place  of  those  deposited  or  pledged, 
or  to  use  them  for  their  own  (the  bank's)  profit.335  Such 
authorization  has  to  be  made  in  conformity  with  article  2, 
section  i  of  the  bank  deposit  law,  expressly  in  writing 
and  for  each  individual  case,  only  when  the  person  in 
question  is  not  a  banker.  The  great  banks,  however,  do 
not  make  a  practice  of  obtaining  such  authorizations. 

The  banks,  although  not  required  by  law,  regularly 
furnish  a  memorandum  giving  the  issue  numbers  of  the 
securities,  generally  by  signing  and  returning  one  of  the 
two  slips  (bordereaux)  which  accompany  the  order. 


333 


National    Monetary     Commission 

No  perfectly  reliable  conclusions  can  be  drawn  from  the 
balance  sheets  hitherto  in  vogue  concerning  the  extent  of 
the  brokerage  business  of  the  great  banks.  On  the  one 
hand,  the  heading  ' '  Commissions ' '  (Promswnen)~~cdvers 
not  only  the  commissions  derived  from  the  brokerage 
business  in  its  widest  sense,  but  also  in  many  cases  all  or 
part  of  the  commissions  derived  from  the  discounting  of 
bills,  which  really  ought  to  be  booked  under  the  bill 
account,  because  these  commissions  are  not  always 
deducted  from  the  particular  bill  entries,  but  are  calculated 
only  at  the  reckoning  of  the  whole  account  (from  the 
amount  of  the  total  transactions)  ,336  Again,  the  commis- 
sions earned  in  the  current  account  business  are  in  many 
cases  booked  under  the  commission  account,  so  that  this 
account,  homogeneous  as  it  looks,  is  really  a  ' '  collective 
account. " 

What  has  been  said  here  of  the  commissions  earned 
through  the  discounting  of  bills  holds  true  also  of  the 
purchase  and  sale  of  securities,  the  commissions  due  to 
the  banker  being  either  calculated  from  the  total  transac- 
tions of  the  account,  on  the  larger  side,  or  being  at  once 
added  to  or  deducted  from  the  calculated  total  amount  of 
each  individual  statement.337  In  the  former  case  the  net 
profit  in  the  way  of  commissions  is  transferred  in  one  sum 
at  the  reckoning  of  the  account  to  the  collective  account 
"Commissions;"  in  the  latter  case  the  commissions  are 
booked  in  a  separate  account,  but  in  that  case,  if  a 
wrong  impression  is  to  be  avoided,  they  have  to  be 
picked  out  singly  and  transferred  to  the  commission  ac- 
count. This  distinction  while  of  no  importance  as  regards 
the  question  of  the  total  amount  of  profit  from  the 
brokerage  business,  does  exert  an  influence,  of  course, 

334 


T  h 


e  r  m  a  n 


G 


r  e  a 


t    B 


a  n 


on  the  amount  of  commissions.  Thus,  for  example, 
according  to  a  resolution  of  the  Stamp  Union  (Stempel- 
vereinigung) ,  the  total  transactions  in  dividend-paying 
securities  are  no  longer  carried  in  ordinary  account,  as 
was  done  so  long  as  a  commission  was  calculated  only  from 
the  total  transactions  of  that  account  (on  the  larger  side) , 
but  a  special  commission  is  charged,  both  for  the  purchase 
and  for  the  sale  of  dividend-paying  securities,  which  are 
booked  in  a  separate  account,  the  dividend-paying  security 
account. 

With  the  reservations  resulting  from  the  above  state- 
ments, an  approximate  idea  of  the  extent  of  the  broker- 
age business  in  the  German  credit  banks  may  be  gained 
from  the  following  table,  since  a  very  large  part  of  the 
commissions  (Promsionen)  booked  on  the  commission 
account  (Promsionskontd)  is  undoubtedly  derived  from  the 
brokerage  business  proper. 

According  to  the  Deutscher  Oekonomist, 338  the  German 
credit  banks  having  a  capital  of  at  least  i  ,000,000  marks 
each  showed  the  following  totals  (in  millions  of  marks) : 


Ratio  of 

Ratio  of 

Commis- 

commis- 

Commis- 

commis- 

Year 

Gross 
profits 

sions 
(Pro-vi- 

sions  (Pro- 
visionen) 

Year. 

Gross 
profits 

sions 
(Pro-vi- 

sions  (Pro- 
•visionen) 

sionen)  . 

to  gross 

sionen 

to  gross 

profits. 

profits. 

Per  cent. 

Per  cent 

1885  

77.81 

19.7 

25-3 

1897  

179-37 

40.  4 

22.5 

1886.... 

78.69 

20.5 

26.  o 

1898.... 

218.38 

50-5 

23-  i 

1887  

80.97 

20.  7 

25-5 

1899  

261.  77 

57-9 

22.  I 

1888.... 

no.  48 

24.  2 

22.  0 

1900..  .  . 

262.  02 

60.  o 

22.9 

1889.... 

141.  oo 

32.1 

22.8 

1901  .... 

258.40 

58.9 

22.8 

1890..  .  . 

141.  04 

32.  2 

22.8 

1902..  .  . 

256.  76 

57-7 

22.5 

1891..  .  . 

112.  IS 

28.8 

25-7 

1903  

253-  21 

62.7 

24-7 

1892  

in-  93 

26.7 

23-8 

1904..  •  • 

273-SO 

68.2 

25-0 

1893  

no.  03 

27.8 

25-2 

1905..  •  • 

330.  20 

81.4 

24-7 

1894..-. 

112.  29 

28.  i 

25-0 

1906.  .  .  . 

377-08 

91-4 

24-3 

1895  

ISO.  83 

34-3 

22.8 

1907..  .  . 

382.  28 

97-5 

25-S 

1896.... 

158.93 

35-4 

22.3 

1908..  .  . 

417-20 

103.7 

24-9 

335 


National    Monetary     Commission 

From  this  it  appears  that  the  commissions  (Promsioneri) , 
with  the  exception  of  the  years  of  depression  of  1891  and 
1892,  kept  on  rising,  very  rapidly  from  1885  to  1890,  less 
rapidly  but  very  steadily  for  the  period  following  1892;  but 
since  the  total  gross  profits  from  1885  on  (with  slight  in- 
terruptions in  1891-1893,  1901  and  1903),  also  rose  very 
considerably,  the  ratio  of  commissions  to  gross  profits 
remained  nearly  uniform  throughout  the  period  1885-1908, 
showing,  in  fact,  a  slight  decline. 

At   any  rate,  almost   one-fourth   of   the  gross   profits 

4  throughout  that  period  resulted  from  commissions  derived, 
no  doubt,  for  the  most  part  from  the  brokerage  business 
(Kommissionsgeschdft)  ,339 

(G)    THE  TRANSFORMATION,  FOUNDING,  ISSUING,  SYNDICATE, 
AND   SECURITY   BUSINESS? 

(i)   The  transformation  and  founding  business. 

The  objections  to  the  German  "  mixed  banking  sys- 
tem ' '  are  twofold.  On  the  one  hand  it  is  urged  that  the 
deposits  are  not  sufficiently  secured  by  liquid  assets,  which 
implies  a  lack  of  soundness  in  administration.  This  point 
will  be  dealt  with  at  greater  length  in  section  8.  On  the 
other  hand,  it  is  pointed  out  that  the  transformation 
and  founding  business  extensively  conducted  by  the  Ger- 
man credit  banks  involves  grave  dangers  both  for  the  credit 
banks  themselves  and  for  the  community  at  large.  This 
point  we  shall  now  proceed  to  discuss. 

In  previous  sections  (pp.  4  and  5)  we  noted  that  the 
prompt  undertaking  of  the  transformation  and  founding 
business — that  is  to  say,  the  financing  business  proper  34°  — 
by  the  German  credit  banks,  corresponded  to  an  urgent 

336 


•\ 


The     German     Great    Banks 

need  of  the  industrial  and  commercial  interests  of  Ger- 
many. The  very  earliest  German  credit  banks  were 
created,  first  and  foremost,  for  the  purpose  of  promoting 
trade  and  industry,  as  indicated  by  the  very  firm  name  of 
the  Darmstadter  Bank:  "  Bank  for  Trade  and  Industry." 
The  establishment  in  Germany  of  special  banks  of  deposit 
was  out  of  the  question,  mainly  because,  in  view  of  the 
low  level  of  prosperity  of  the  population,  such  banks  would 
not  have  yielded  sufficient  profits. 

Furthermore,  in  the  very  beginning  of  the  volume  we 
pointed  out  that  the  special  nature  of  the  transformation 
and  founding  business  demands  a  vast  amount  of  technical, 
business,  and  general  economic  knowledge  and  experience, 
which  could  only  be  accumulated  little  by  little  in  the 
credit  banks.  The  need  for  such  experience,  combined 
with  the  continuous  watching  of  the  money  market  and 
an  accurate  knowledge  of  the  capital  market,  as  well  as  of 
the  factors  connected  therewith,  such  as  the  capacity 
of  the  market  for  taking  up  new  securities  and  the  con- 
ditions determining  the  market  value  of  these  securi- 
ties, etc.,  was  of  itself  sufficient  to  create  " special 
economic  organs,"  which,  to  use  Schaeffle's  expression, 
were  to  perform  "the  special  function  of  the  initiative 
in  the  joint-stock  industry. ' ' 

Moreover,  the  necessity  of  a  division  of  labor,  of 
combination  and  decentralization  of  establishments,  of 
supplying  the  wholesale  demand  and  of  overcoming  or 
warding  off  foreign  competition,  gave  rise  to  industrial 
large-scale  production,  whose  favorite  form  is  the  stock 
cunipaliy,  because  it 'obtains  credit  more  easily  than  the 
individual  entrepreneur,  and  on  that  account  is  more 

—23  337 


National    Monetary     Commission 

susceptible  of  expansion.  This  was  another  reason  why 
in  Germany  the  task  of  transforming  existing  establish- 
ments into  stock  companies,  or  of  founding  new  stock 
companies,  fell  to  the  share  of  the  banks,  as  central  reser- 
voirs of  funds  available  for  productive  purposes,  the  stock 
companies  themselves  representing  a  concentration  of 
small  amounts  of  capital,  each  in  itself  insufficient  for  pro- 
ductive utilization. 

Large-scale  industry  and  capitalism,  bearing  to  each 
other  the  reciprocal  relation  of  cause  and  effect,  were  thus 
enabled,  by  the  aid  of  the  German  credit  banks,  to  unite 
in  an  inseparable  alliance,  which  impressed  its  character- 
istic stamp  on  the  entire  economic  development  of  Ger- 
many during  the  two  epochs  under  discussion. 

We  saw  (pp.  38  and  115)  that  in  Prussia,  up  to  the  inter- 
vention of  the  credit  banks,  during  the  entire  quarter  of  a 
century  from  1826  to  1850,  only  102  stock  companies, 
with  a  combined  capital  of  about  638,000,000  marks, 
were  formed.  In  contrast  with  this,  the  first  epoch  here 
considered  (more  accurately  the  period  terminating  with 
the  beginning  of  the  second  half  of  1870),  was  marked  by 
the  founding  of  295  stock  companies  with  a  capital  of 
about  2,404,760,000  marks,  due,  first  and  foremost,  to  the 
activity  of  the  German  credit  banks  in  the  field  of  trans- 
formation and  issue. 

But  even  this  was  merely  the  first  puff  of  wind  before 
the  beginning  of  the  storm. 

Beginning  with  the  second  half  of  the  year  1870  up  to 
1874,  857  stock  companies  were  formed  in  Germany,  with 
a  capital  stock  of  3,306,810,000  marks.  This  overproduc- 
tion in  transformations^344- and  new  flotations  in  these 


338 


The     German     Great    Banks 

four  and  one-half  years,  as  well  as  the  great  abundance  of 
money  and  the  fever  of  enterprise  and  speculation,  were 
of  course  either  created  or  at  least  reinforced  by  the 
sudden  inflow  of  the  5,000,000,000  francs  of  the  French 
war  indemnity.  Combined  with  other  factors,  that  over- 
production was  one  of  the  most  important  causes  of  the 
great  crisis  of  i873-342 

In  the  first  epoch  (from  the  middle  of  the  nineteenth 
century  to  the  year  1870),  when  industrial  enterprises 
to  a  large  extent  lacked  sufficient  capital  and  energetic 
entrepreneurs,  the  banks,  in  many,  perhaps  the  majority 
of  cases,  had  to  take  the  initiative  in  the  work  of  trans- 
formation and  founding.  A  natural  incident  of  this  proc- 
ess was  that  the  banks  often  took  a  share,  at  times  a  very 
considerable  share,  in  the  transformed  or  newly  founded 
enterprises  through  the  purchase  of  stock  or  other  direct 
participation.  As  noted  above  (p.  72),  the  1852  report  of 
the  A.  Schaaffhausen'scher  Bankverein  expressly  states 
(p.  3)  that  it  is  the  function  of  a  large  bank  "  to  induce  the  1 
capitalists  of  the  country  to  direct  idle  capital  toward  ^ 
those  enterprises,  which,  when  properly  launched,  in  re-  / 
sponse  to  real  needs,  and  offering  the  guarantee  of  expert 
management,  bid  fair  to  bring  adequate  returns."  It  was 
that  very  bank,  the  oldest  German  credit  bank,  which 
as  early  as  1851  took  a  share  in  the  founding  of  the 
Horder  Bergwerks-  und  Huttenverein,  in  1852  in  that  of 
the  Coiner  Bergwerks-Verein,  the  Colnische  Baumwoll- 
Spinnerei,  the  Colnische  Maschinenbau-Aktiengesellschaft, 
the  Coln-Mtisner  Bergwerks- Aktiengesellschaft,  and  the 
Colnische  Baumwoll-Spinnerei  und  Weberei,  wisely  mak- 
ing choice  of  local  enterprises  in  its  near  vicinity,  which 


339 


National    Monetary     Commission 

it  was  in  position  to  keep  under  steady  surveillance.  In 
this  way  it  avoided  those  severe  losses  to  which  other 
banks,  not  equally  cautious,  were  subjected  at  that  time. 

Thus  the  Darmstadter  Bank,  shortly,  before  the  crisis 
of  1857,  took  part  in  seven  industrial  enterprises  which  in 
1856  it  had  transformed  into  stock  companies  or  newly 
founded.  These  enterprises  had  a  combined  capital  of 
2,500,000  thalers,  in  round  figures.  Among  them  was  a 
woolen  and  cotton  factory,  a  spinning  and  weaving  factory, 
a  mining  company,  the  Oldenburg-Bast  Indian  Shipping 
Company,  and  two  machine  factories.  This  permanent 
investment  in  stock  meant  afterward  corresponding 
amounts  permanently  written  off.  In  one  case,  that  of 
the  Mannheim  woolen  factory,  the  entire  stock  was  lost. 

The  Disconto-Gesellschaft  in  1857  founded  the  Hein- 
richshutte  mining  and  smelting  works  with  a  capital  of 
about  1,750,000  thalers.  In  1863,  after  heavy  losses,  it 
was  found  necessary  to  separate  that  enterprise  from  the 
Disconto-Gesellschaft  and  to  place  it  in  control  of  the 
business  managers,  with  participation  of  the  Disconto- 
Gesellschaft  on  a  silent  partnership  basis.  In  1872,  the 
establishment  was  merged  in  the  newly  founded  Dort- 
munder  Union  Aktiengesellschaft  fur  Bergbau-  Eisen-  und 
Stahlindustrie,  which  was  destined  to  cause  still  greater 
trouble  to  the  bank. 

The  Mitteldeutsche  Kreditbank  suffered  heavy  loss 
through  the  acquisition  of  the  Ludwigshutte  at  Bieden- 
kopf,  which  in  1858  had  been  transformed  into  a  stock 
company  under  the  name  of  Oberschlesischer  Hiitten- 
verein,  the  share  of  the  bank  amounting  to  one-third  of 
the  stock.  The  same  happened  with  the  Wasungen  cigar 


340 


The      German     Great     Banks 

factory,  in  which  the  bank  acquired  a  share  interest 
in  1856. 

This  initiative  in  the  business  of  transformations  and 
foundings,  often  dearly  paid  for  by  the  banks,  was  largely 
reinforced  and  facilitated  by  the  defective  legislation  of 
that  time,  which  made  practically  no  provision  for  the 
true  indication  nor  the  strict  civil  and  penal  responsibility 
of  the  persons  concerned  in  the  founding.  It  was  only 
the  new  law  (Novelle)  of  1884  that  denned  the  term 
" founder"  (Grander),  provided  for  the  complete  publicity 
of  the  founding  process,  and  introduced  strict  civil  and 
penal  responsibility  of  the  founders  and  their  associates. 
The  argument  accompanying  that  law  describes  the  pre- 
vious legal  condition  in  words  which  deserve  to  be  rescued 
from  oblivion  (pp.  87-88) : 

"The  founding  process  was  concealed;  the  true  indication  of 
the  founders  was  not  legally  required;  the  leading  pr-omoteES 
acted  without  any  sense  of  responsibility  and  were  exempt 
from  any  kind  of  control.  The  temptation  to  put  private 
interest  above  that  of  the  company  to  be  established  was  too 
powerful.  No  person  was  appointed  and  no  measures  taken 
to  guard  the  interests  of  the  company.  For  a  long  time  after 
its  foundation  the  newly-formed  company  possessed  no  corpo- 
rate autonomy  and  remained  defenseless  in  the  hands  of  per- 
sons whose  only  object  was  their  profit  as  founders.  At  the 
same  time  the  public,  which  these  persons,  without  any  risk  or 
responsibility,  had  in  every  possible  manner  sought  to  attract 
to  a  participation  in  the  company,  either  formally  organized 
or  to  be  organized,  had  no  reliable  data  whereby  to  form  a 
correct  estimate  of  the  enterprise. 

In  a  number  of  the  criminal  proceedings  that  took  place 
during  the  crisis  just  past  [1873]  it  was  not  even  possible  to 


National    Monetary     Commission 

ascertain  the  names  of  the  authors  and  publishers  of  the  pros- 
pectuses by  means  of  which  the  public  had  been  invited  to 
subscribe." 

So  long  as  it  was  possible  to  start  industrial  transforma- 
tions and  foundings  under  the  screen  of  anonymity  and 
freedom  from  any  strict  responsibility,  there  was  of  course 
also  an  opportunity  for  "  industrial  stock  jobbery"  ("indus- 
trlelle  Ausschlachtungen")  which  Sattler,343  with  a  some- 
what strange  exaggeration,  describes  as  the  essence  of  trans- 
formation in  general;  and,  above  all,  overcapitalization 
of  the  worst  kind  was  the  order  of  the  day.  There  was 
no  inquiry  into  the  prices  allowed  for  the  property  con- 
tributed (A  p  ports),  nor  into  the  compensations  allowed 
for  the  founding  and  the  preparations  for  it,  nor  into 
the  intermediate  profits  made.  The  premium  on  the 
shares  issued  by  the  company  did  not  flow  into  the  reserve 
fund  of  the  company,  as  it  does  now,  but  into  the  pockets 
of  the  original  owners  who  were  credited  therewith  on 
account  of  the  property  contributed  by  them  (A p ports) . 
As,  moreover,  the  names  of  the  founders  and  the  interme- 
diate profits  were  in  nowise  required  to  be  published  the 
transformation  and  founding  business  could  not  fail  to 
become  a  special  trade  offering  peculiar  attractions.  On 
the  other  hand,  it  is  not  surprising  that  of  the  857  stock 
companies,  with  a  capital  of  3,306,810,000  marks,  which, 
as  we  have  seen,  were  established,  in  the  time  between 
the  middle  of  1870  and  the  beginning  of  1874,  that  is  to 
say,  before  the  new  Joint  Stock  Companies  Law  of  1884, 
not  fewer  than  1 23  were  in  liquidation  as  early  as  Decem- 
ber, 1874,  and  37  were  bankrupt  (im  Konkurs)™*. 


342 


The     German     Great    Banks 

As  may  be  gathered  from  what  has  been  said,  the  great 
banks  in  the  first  epoch  very  largely  footed  the  bills  for 
the  transformations  and  foundings  of  that  time.  It  must 
be  further  admitted  that,  after  quickly  earning  the  profits > 
often  very  large,  from  the  transformation  or  founding, 
they  did  not  leave  the  enterprises  to  their  fate,  as  they 
might  easily  have  done  under  then  existing  legislation,  but 
retained  a  share  in  them,  often  to  a  larger  extent  than  was 
compatible  with  the  principles  of  liquidity.  This  was 
done  not  only  in  order  to  retain  the  necessary  influence 
over  the  industrial  enterprise,  but  also,  as  expressly  stated 
in  many  reports  of  that  time,  in  order  to  exercise  a  perma- 
nent supervision  over  the  management  of  those  enter- 
prises, a  measure  which  was  deemed  indispensable  in  the 
interest  of  the  issue  credit  of  the  banks,  since  the  trans- 
formation or  founding  was  in  most  cases  followed  by 
issues  of  stock  or  bonds.  This  was  the  main  reason  why 
it  became  customary  even  in  the  first  epoch  to  appoint 
some  of  the  directors  of  the  credit  banks  as  members  of 
the  supervisory  boards  of  industrial  enterprises. 

Even  in  the  second  epoch  (1870  to  the  present  date) 
there  was  no  lack  of  instances  of  permanent  direct  par- 
ticipations of  the  banks  in  industrial  enterprises,  leading 
to  the  same  untoward  results  as  in  the  first  epoch, 
though  during  this  more  recent  period  they  have  been  the 
exception. 

Thus  the  Disconto-Gesellschaft  involved  itself  in  great 
loss  and  trouble  ever  since  1872  because  of  the  foundation 
of  the  Dortmunder  Union,  and  after  1890  because  of  its 
participation  in  the  Internationale  Druckluft-  und  Elek- 
trizitats-Gesellschaft  (Popp)  and  in  the  Venezuela  Rail- 


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National    Monetary     Commission 

way.  The  same  happened  to  the  Dresdner  Bank  by 
reason  of  the  taking  over  of  the  Anglo-Deutsche  Bank 
(1892)  and  the  consequent  participation  in  the  Export 
and  Warehouse  firm  (Export-  und  Lagerhaus-Gesellschaf  t) 
J.  Ferd.  Nagel,  which  cost  that  bank  about  2>^  million 
marks. 

The  Deutsche  Bank  was  for  years  involved  in  great 
difficulties  and  annoyances  through  the  foundation  of 
the  Deutsch-Oesterreichische  Mannesmann-Werke,  estab- 
lished under  its  direction  and  with  its  participation  in 
1890,  the  bank  having  the  presidency  in  the  supervisory 
board.  In  1900  the  capital  stock  of  that  concern  had 
to  be  reduced  from  34,000,000  to  25,000,000  marks. 

In  the  case  of  the  Berliner  Handelsgesellschaft,  which 
remained  in  the  main  a  flotation  bank  even  in  the  second 
epoch,  the  loss  in  1873  arose  not  so  much  from  voluntary 
participations  in  new  foundations,  in  which  it  lost  in  round 
figures  158,000  thalers,  or  1%  per  cent  of  its  capital  at 
that  time,  as  from  securities  of  newly  founded  companies 
that  could  not  be  disposed  of — that  is  to  say,  involuntary 
participations — such  as  are  apt  to  occur  in  the  issue  busi- 
ness. It  suffered  also  exceedingly  large  losses  through 
the  founding  of  the  German  Local  and  Street  Railway 
Company  (Deutsche  Lokal-  und  Strassenbahn-Gesellschaff) 
and  the  Petroleum  Exploration  Franchise  and  Oil  Land 
Company  (Petroleum-Bohr  Gerechtsamen-  und  Oelland- 
Gesellschaff) ,  in  1880. 

It  can  not  be  doubted  (see  p.  242,  under  b)  that 
the  permanent  assumption  of  large  risks  in  enter- 
prises by  credit  banks  is  incompatible  with  the  funda- 
mental principles  of  sound  banking  policy.  Transgres- 


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The     German     Great    Banks 

sions  of  this  rule  have  almost  always  brought  their  own 
atonement,  often  of  a  cruel  nature.  For  this  reason  the 
credit  banks,  during  the  second  epoch,  in  order  to  avoid 
direct  participation,  have  to  a  large  extent  resorted  to  the 
intervention  of  trust  and  finance  companies  for  the  pur- 
pose of  exercising  their  promoting  activity  and  for  the 
financing  of  subsidiary  banks. 

The  reorganization  of  an  existing  enterprise  is  a  less 
serious  undertaking  for  a  bank  than  a  new  foundation, 
because  the  earning  capacity  of  the  enterprise  has  already 
been  tested  for  some  time  before  transformation.  On  the 
other  hand,  it  is  more  risky  than  a  new  foundation,  if  the 
transformation  is  compulsory.  Such  may  be  the  case 
when  the  industrial  enterprise  is  compelled  to  resort  to 
this  expedient  for  the  purpose  of  canceling  the  bank 
credit  granted  to  it.  It  may  also  happen  that  a  bank 
which  had  granted  to  the  enterprise  long-term  or  short- 
term  operating  credit,  which  in  default  of  repayment  has 
little  by  little  been  transformed  into  permanent  loans,  is 
compelled  to  demand  the  transformation  in  order,  first  of 
all,  to  mobilize  that  credit  in  the  form  of  stock,  and  then 
to  realize  on  that  stock  as  soon  as  the  state  of  the  market 
may  permit. 

The  special  danger  of  such  a  compulsory  transforma- 
tion, as  noted  in  another  connection  (pp.  243  to  247),  lies 
in  this  that  under  the  pressure  of  necessity  it  is  not  pos- 
sible to  give  due  consideration  to  the  dangers  that  may 
arise  from  the  transformation,  in  view  of  the  overwhelming 
competition  of  other  stock  companies,  or  of  the  general 
politcal,  economic,  and  business  conditions,  and  the  market 
conditions  and  prospects  of  the  special  branch  of  industry. 


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There  arise  the  further  questions,  whether  the  enterprise 
is  suitable  for  the  form  of  a  stock  company,  whether  it 
can  be  made  to  pay  in  view  of  the  greater  running  expenses 
which  may  with  certainty  be  expected  to  result  from  the 
transformation,  and,  finally,  whether  a  sufficiently  capable 
management  is  on  hand  and  can  be  permanently  retained. 
All  these  questions  are  apt  to  receive  insufficient  considera- 
tion in  the  case  of  compulsory  transformations,  with  dire 
consequences  sooner  or  later. 

On  the  whole,  however,  the  transformation  and  issue 
business  during  the  second  epoch  proceeded  much  more 
quietly  and  conservatively  than  during  the  first  epoch, 
the  reason  being  that  the  banks  had  little  by  little  acquired 
greater  technical  and  business  experience  in  this  field, 
and  were  less  and  less  required  to  take  the  initiative 
in  foundings  and  transformations.  That  initiative  was 
transferred  to  a  constantly  increasing  extent  to  industry 
itself,  which  became  more  and  more  independent  in  pro- 
portion as  it  was  enabled  to  determine  the  necessity  and 
manner  of  investments  of  capital.  In  many  cases  also, 
as  we  have  seen,  foundings  or  transformations  were  occa- 
sioned, during  the  second  epoch,  in  obedience  to  the 
requirements  of  the  cartel  policy,  by  purely  technical  con- 
siderations, as  for  example,  the  consolidation  of  a  number 
of  small  competing  enterprises  into  one  large  concern,  the 
consolidation  of  different  stages  of  the  process  of  produc- 
tion in  one  establishment,  the  combination  of  iron  fur- 
naces with  coal  mines  and  conversely,  etc. 

Moreover,  beginning  with  1884,  the  intentional  or  cul- 
pably negligent  overvaluation  of  property  contributed 
(Apports)  was  made  very  difficult,  the  concealment  of  the 

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The     German     Great    Banks 

names  of  the  founders  and  their  associates  and  of  the 
founders'  profits,  or  of  profits  made  pending  the  organiza- 
tion, was  rendered  virtually  impracticable  under  existing 
legislation,  and  the  value  of  shares  or  compensations 
granted  as  an  equivalent  for  property  contributed  or 
taken  over  was  made  subject  to  thrice-repeated  audit  by 
persons  strictly  liable  civilly  as  well  as  criminally. 

These  new  conditions  helped  the  industrial  concerns 
to  meet  the  crisis  of  1900  infinitely  better  than  that  of 
1873.  But  in  addition,  the  new  law  of  July  18,  1884 
(art.  i85b,  Nos.  i  and  2),  had  placed  the  stock  com- 
panies under  obligation  to  establish  a  legal  reserve  fund, 
to  which  a  certain  part  of  the  yearly  net  profits  and  the 
premiums  on  any  new  stock  was  to  be  transferred  (see 
art.  262,  commercial  code).  As  a  result,  very  consider- 
able reserve  funds  had  been  accumulated,  especially  by 
industrial  companies,  by  the  time  the  crisis  of  1900  burst 
upon  them,  strengthening  their  financial  status,  and 
consequently  also  their  power  of  resistance  in  critical 
times. 

2.  The  issuing,  syndicate ,  and  security  business. 
(a)  THE  ISSUING  BUSINESS  IN  GENERAL. 

The  issuing  business  is  discussed  in  this  place,  because  its 
development  by  the  German  credit  banks  has  been  such 
that  it  became  a  branch  of  the  regular  banking  business 
from  the  very  start,  and  because  the  issuing  business  in 
very  many  cases  involves  the  granting  of  credit,  though 
this  is  not  implied  in  its  nature.  Accordingly  it  seems 
appropriate  to  discuss  the  issuing  business  in  connection 
with  the  other  credit  business  of  the  banks. 


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National    Monetary     Commission 

It  was  normally  to  be  expected  that  the  issuing  business 
would  grow  in  importance  in  Germany  as  a  consequence 
of  increasing  prosperity,  because  the  higher  and  middle 
classes  in  Germany  have  long  been  in  the  habit  of  invest- 
ing their  available  funds  permanently  either  in  enter- 
prises, participations,  real  estate,  buildings  and  mortgages, 
or  in  securities.  Bank  deposits  in  Germany  are  made  up 
mainly  of  the  temporary  investments  of  the  available 
funds  belonging  to  these  classes  and  the  operating  reserves 
of  the  trading  classes.  By  far  the  commonest  form  of 
permanent  investment  is  in  securities. 

(«)  METHODS  USED  IN  THE  ISSUING  BUSINESS  PROPER,  AND  IN 
THE  PRELIMINARY  STAGES. 

The  issuing  business  of  the  banks,  which  in  Germany 
absorbs  a  very  large  portion  of  banking  activity,  is  by 
no  means  one  of  those  occupations  in  which  large  profits 
can  be  raked  in  without  trouble  and  "without  corre- 
sponding work."345  On  the  contrary,  it  requires  a  vast 
amount  of  labor,  sagacity,  and  caution  on  the  one  hand 
and  of  financial,  economic,  and  mercantile  knowledge  on 
the  other.  In  particular,  those  who  conduct  it  must  have 
a  clear  insight  into  the  situation  and  prospective  develop- 
ment of  the  money  and  capital  market,  the  relation  be- 
tween supply  and  demand  in  both  markets,  and  into  the 
working  of  those  factors  that  may  influence  the  rates  of 
bank  and  market  discount,  the  exchange  rates,  as  well  as 
the  absorbing  capacity  of  the  ordinary  and  extraordinary 
circle  of  customers. 

Thus,  even  before  underwriting  the  proposed  issue,  a 
careful  and  detailed  examination  is  required,  which  pre- 


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The     German     Great    Banks 

supposes  a  large  amount  of  expert  knowledge  and  practical 
experience.  The  decision  whether  the  undertaking  (that 
is  to  say,  the  financing)  is  advisable  or  not  depends  in  each 
case  not  only  on  the  examination  of  the  intrinsic  value  of 
the  securities  to  be  underwritten,  the  reasonableness  of 
the  price  demanded,  and  the  solvency  and  trustworthiness 
of  the  debtor  (state,  commune,  corporation,  company, 
etc.),  but  on  a  large  number  of  other  important  factors, 
which  require  close  examination.346 

First  and  foremost,  in  accordance  with  the  fundamental 
principles  of  banking  policy,  to  wit,  the  distribution  of 
risk  and  the  maintenance  of  the  liquidity  of  the  assets 
which  might  be  endangered  by  the  tying  up  of  funds  for 
a  considerable  period,  it  is  necessary  to  inquire  whether  a 
quick  distribution  of  the  proposed  issue — that  is  to  say, 
a  smooth  and  prompt  completion  of  the  financing  and 
issuing  business — may  be  expected  in  view  of  the  situation 
of  the  home  market  (occasionally  also  of  foreign  markets) , 
the  general  economic  and  political  conditions,  the  existing 
and  prospective  ease  or  stringency  of  the  money  market, 
the  known  or  probable  issue  of  like  or  similar  securities, 
some  of  which  may  bear  a  higher  rate  of  interest,  or  be 
presented  under  better  auspices,  or  correspond  more 
closely  to  the  existing  favor  or  inclination  of  the 
public,  etc. 

When  the  question  of  undertaking  the  issue  has  already 
been  answered  in  the  affirmative,  tl\e  fixing  of  the  most 
advantageous  conditions  of  underwriting  and  of  payment 
requires  the  closest  study  and  discussion.  The  very  man- 
ner of  underwriting  will  differ  according  to  the  situation 
of  the  money  and  capital  market  and  according  to  the 


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National    Monetary     Commission 

periods  for  taking  over  and  payment.  In  particular,  these 
and  a  number  of  other  factors  have  to  be  considered  in 
order  to  decide  whether  it  is  advisable  to  underwrite  the 
.entire  amount  in  question  unreservedly  (in  a  lump  or  in 
partial  amounts,  to  be  determined  by  agreement)  ,  or  only 
out  rcseryejjthe  other  '  *  under  option.  '  '  In  the 


latter  case  it  becomes  important  to  decide  whether  the 
prices  of  the  *  '  options  '  '  may  be  the  same  for  all  the  partial 
amounts  to  be  taken  up  gradually,  or  whether  the  prices 
of  the  '  '  options  '  '  may  be  graduated  in  a  manner  advan- 
tageous to  the  financing  establishment,  while  the  seller 
in  such  cases  will  frequently  demand  rising  '  '  option  '  ' 
prices.  As  regards  the  mode  of  payment  and  the  periods 
of  taking  up  and  paying  for  the  partial  amounts  assumed 
or  to  be  assumed  at  option,  the  bank  will  have  to  try  to 
secure  the  most  advantageous  conditions,  having  regard 
to  the  conditions  of  subscription  that  may  afterwards  be 
deemed  practicable. 

If  during  the  negotiations  there  occurs  an  unfavorable 
turn  either  in  the  financial  situation  of  the  debtor  or  in 
the  money  and  capital  market  or  in  the  political  or  gen- 
eral economic  situation,  and  the  bank  while  unwilling  to 
undertake  the  issue  desires  to  bind  the  other  party,  it  may 
be  found  advisable  to  grant  for  the  time  being  a  certain 
credit  to  the  party  in  question,  and  this  will  necessitate 
the  determination  of  the  conditions  of  payment  of  interest 
and  principal.  At  the  same  time,  however,  the  bank  may 
either  try  to  secure  the  right  of  preemption  of  the  future 
loan,  against  which  the  credit  is  to  be  reckoned  at  a  rate 
which  is  known  to  be  seriously  offered  by  a  third  party 
(which  the  bank  will,  of  course,  try  to  avoid  as  much  as 


350 


The     German     Great    Banks 

possible) ,  or  an  option  on  the  entire  future  loan  or  a  part 
of  it,  at  a  price  or  graduated  prices  to  be  determined 
beforehand.  The  manner  of  this  graduation  and  the 
amount  of  the  graduated  prices  may  again  give  rise  to 
protracted  negotiations. 

f  As  regards  the  principle  of  the  distribution  of  risk,  the 
bank  will Jiavejtp  consider  whether  it  is  not  already  oyer- 
loaded  with  securities  of  the  same  kind,  or  even,  if  earlier 


issues  of  the  same  debtor  have  not  been  completely 
placed,  or  whether  such  overloading  of  the  market  with^ 
the  same  or  similar  securities  exists  or  is  to  be  expected. 
On  the  other  hand,  it  is  to  be  considered  whether  the  risk 
of  the  underwriting  may  not  be  diminished  by  the  forma- 
tion of  an  underwriting  syndicate  (Uebernahmekonsor- 


tiuni)  or  subsidiary  participations  (Unterbeteiligungen) . 

If  the  underwriting  has  been  decided  on,  the  juridical 
features  of  the  contract  may  sometimes  present  serious 
difficulties,  especially  as  regards  the  juridical  form  of  the 
act  of  pledging  demanded  by  the  bank  of  property  items 
intended  to  secure  the  loan.  In  that  case  foremost  atten- 
tion must  be  paid  to  the  law  (possibly  foreign  law)  pre- 
vailing at  the  place  where  the  items  pledged  are  located, 
and  at  the  same  time  all  the  measures  will  have  to  be 
agreed  on  which  are  necessary  and  admissible  in  order  to 
afford  security  also  to  the  individual  holders  of  the  certifi- 
cates of  partial  indebtedness  to  be  issued — for  example, 
the  appointment  of  a  representative,  whose  rights  and 
duties  will  have  to  be  defined.  Again,  it  may  be  neces- 
sary that  the  so-called  war  clause  be  introduced,  especially 
if  a  considerable  period  elapses  before  subscription,  as  is 
apt  to  be  the  case  when  the  issue  is  to  be  made  in  different 


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countries  simultaneously,  so  that  official  listing  will  have  to 
be  secured  from  several  authorities.  In  virtue  of  this  war 
clause  the  bank  would  have  the  right  to  withdraw  from 
the  contract  in  case  any  of  the  countries  concerned 
becomes  directly  or  indirectly  involved  in  war.  It  must 
be  borne  in  mind,  however,  that  other  unfavorable  events 
may  occur,  and  hence  it  will  be  advisable  to  endeavor  to 
secure  the  insertion  of  a  general  withdrawal  clause — for 
example,  to  the  effect  that  the  bank  has  the  right  to  with- 
draw in  case  the  quotation  for  the  leading  government 
securities,  such  as  German  Imperial  bonds  or  consols,  shall 
have  fallen  below  a  certain  point. 

Furthermore,  the  contract  will  have  to  provide  that  the 
debtor  shall  agree  to  furnish  all  documents,  balance  sheets, 
and  other  evidence  required  for  the  purpose  of  the  subscrip- 
tion or  demanded  by  the  respective  listing  authorities 
(Zulassungsstelleri) ;  to  remit  to  the  issuing  house  some  time 
before  maturity  the  amounts  required  for  the  payment  of 
coupons  or  certificates  drawn  by  lot,  together  with  the 
commission  due  to  the  bank  for  this  service,  which  also 
has  to  be  specified;  finally,  to  publish  in  designated  peri- 
odicals those  periodic  notices  which  are  legally  required, 
in  particular,  statements  of  the  number  and  designation 
of  the  securities  which  (in  the  manner  agreed  on — that  is 
to  say,  by  lot  or  by  free  sale)  shall  become  subject  to  re- 
demption. In  regard  to  such  redemptions,  drawings,  etc., 
the  debtor  will  also  have  to  agree  to  make  these  redemp- 
tions, as  well  as  the  payments  on  coupons,  at  the  home 
of  the  underwriting  bank,  etc. 

After  the  underwriting  has  been  agreed  on,  the,.,next 
thing  t.n  detfrmjne  will  be  the  price  at  which  the  issue  is 


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The     German     Great    Banks 

.to  take  place  in  order  to  complete  the  transaction  as  expe- 
ditiously  as  possible.  On  this  point  the  following  obser- 
vations may  prove  of  value: 

A  purely  arbitrary  fixation  of  the  issue  price  is  hardly 
ever  practicable;  on  the  contrary,  the  limits  within  which 
anything  like  a  free  determination  of  the  issuing  price  is 
possible  are,  as  a  rule,  decidedly  narrow. 

In  the  case  of  shares  or  bonds  of  a  new  enterprise  the 
lower  limit  is  fixed  by  the  price  paid  by  the  underwriter, 
with  the  addition  of  interest,  stamp  tax,  fees  and  commis- 
sions, and  a  suitable  profit.  This  profit,  especially  in  the 
cases  covered  by  article  41,  section  i,  of  the  bourse  law,347 
must  also  include  a  suitable  premium  against  risk.  The 
upper  limit  is  defined  by  the  market  quotations  of  enter- 
prises of  the  same  or  similar  nature,  already  listed  at  the 
bourse,  and  the  price  of  which  will  correspond  in  the  main 
and  in  the  long  run  to  the  intrinsic  value,  the  dividends 
distributed,  and  the  prospective  earnings. 

In  the  case  of  domestic  state  and  communal  loans  the 
upper  limit  of  the  issuing  price,  unless  determined  by  the 
debtor  himself,  will  be  fixed  by  the  quotations  reached  by 
former  loans  of  the  same  debtor  or  by  corresponding  loans 
of  other  states  or  communes  enjoying  about  the  same 
credit.  It  may  happen,  however,  that  these  quotations 
are  kept  artificially  low  with  a  view  to  the  impending 
new  loan,  or  that  they  are  merely  nominal  and  could  not  be 
maintained  in  case  of  large  transactions.  The  lower  limit 
in  this  case,  too,  is  the  price  to  the  underwriter,  plus  inter- 
est, stamps,  fees,  and  a  profit,  which,  if  possible  at  all, 
varies  in  the  case  of  domestic  state  and  communal  loans 
between  one-eighth,  one-fourth,  and,  in  rare  cases,  one-half 


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National    Monetary     Commission 

of  i  per  cent,  while  even  in  the  case  of  foreign  state  loans 
a  profit  of  three-fourths  of  i  per  cent  is  a  rarity. 

The  issue  prices  of  securities  offered  for  sale  simulta- 
neously at  several  bourses  at  home  and  abroad  have,  of 
course,  to  be  so  fixed  at  home  that  a  disturbance  of  the 
domestic  sales  through  foreign  sales  during  the  period  of 
subscription  and  for  some  time  after  is  not  to  be  appre- 
hended. 

In  case  of  an  issue  of  bonds  of  a  debtor  who  is  already 
represented  by  listed  securities  bearing  a  higher  rate  of 
interest,  the  holders  of  these  may  be  tempted,  immediately 
upon  the  publication  of  the  new  issue,  to  sell  their  old 
securities,  if  they  can  do  so  with  profit,  and  to  buy  the 
new  securities  bearing  a  lower  rate  of  interest,  in  case  the 
price  of  issue  is  such  that  a  rise  may  be  expected.  As  this 
operation  is  apt  to  disturb  and  disorganize  the  whole 
market  in  these  securities,  it  may  be  desirable  to  guard 
against  it  by  an  appropriate  price  of  issue  and  by  other 
conditions  of  subscription. 

It  may,  indeed,  happen  that  in  the  issuing  of  securities 
the  price  has  to  be  fixed  at  a  higher  figure  than  might  nor- 
mally have  been  the  case,  especially  when  in  time  of  a  rising 
market,  by  reason  of  an  actual  or  expected  increase  in  the 
earnings  of  enterprises  and  the  intervention  of  speculation, 
the  entire  level  of  quotations  rises.  This  will  of  necessity 
have  a  marked  effect  on  the  premium  on  newly  issued 
securities,  especially  on  those  issued  in  connection  with  an 
increase  of  capital  of  existing  companies.348 
..  The  time  at  which  an  issue  (subscription)  is  to  take  place 
is  of  great  importance  as  regards  the  question  of  under- 
writing in  general  and  as  regards  the  issue  and  the  price  of 


354 


The     German     Great    Banks 

issue.  It  is  to  be  ascertained  whether  the  bank  or  market 
discount,  which  may  be  low  at  the  time  of  the  underwriting, 
or  the  pertinent  foreign  exchange  rates,  might  not,  through 
existing  or  impending  causes,  tend  to  become  more  unfa- 
vorable at  the  time  for  which  the  issue  is  planned.  If  the 
debtor  desires  the  issue  to  take  place  at  a  certain  time,  per- 
haps coincident  with  the  end  of  a  quarter,  when  there  is 
notoriously  a  strong  demand  for  cash  in  the  money  market, 
it  may  be  well  to  inquire  whether  it  would  not  be  better  to 
fix  the  date  at  the  beginning  of  the  next  quarter,  for 
example,  at  the  beginning  of  January,  when,  by  reason  of 
payments  on  coupons,  of  bills,  salaries,  mortgages,  interest, 
rent,  etc.,  there  is  wont  to  be  greater  ease  in  the  money 
market. 

If  this  be  not  feasible,  it  remains  to  be  considered 
whether  the  taking  up  of  the  securities  should  not  at  least 
be  made  easier  for  the  subscribers  or  purchasers  through 
a  graduation  of  the  periods  of  taking  up  and  payment,  or 
through  facilities  in  the  way  of  calculating  the  interest,  etc., 
whether  a  larger  bonus  should  be  paid  to  the  bankers  whom 
it  is  proposed  to  interest  in  the  placing  of  the  securities,349 
whether  the  requirement  of  a  cash  deposit  at  the  time  of 
subscription  should  be  waived,  etc. 

Furthermore,  steps  should  be  taken,  especially  through 
a  low  price  of  issue,  to  prevent  the  market  from  being  dis- 
organized, after  the  close  of  the  subscription,  by  immediate 
realizations  of  so-called  "concert  subscribers"  (Konzert- 
zeichner),  that  is  to  say,  persons  who,  in  expectation  of  a 
rise  of  the  paper  issued,  subscribe  solely  for  the  purpose  of 
selling  their  subscriptions  at  once  on  the  bourse,  no  matter 
how  insignificant  the  profit.  One  way  of  preventing  this 


355 


National    Monetary     Commission 

is  to  give  some  kind  of  preferential  treatment  to  those  sub- 
scribers who  are  willing  to  agree  not  to  sell  the  securities 
allotted  to  them  for  some  months,  but  to  deposit  them 
with  the  issuing  firm. 

Finally,  as  regards  the  time  after  the  issue,  especially 
when  an  underwriters'  syndicate  (Uebernahmekonsortium) 
has  been  formed,  it  remains  to  be  considered  up  to  what 
amount — usually  stated  in  the  syndicate  contract— the 
securities  shall  be  bought  up  in  the  market  in  order  to  pre- 
vent an  immediate  or  premature  fall  of  the  quotation  be- 
low the  price  of  issue,  in  so  far  as  this  fall  is  not  justified 
by  the  general  situation  or  by  the  state  of  the  bourse. 

According  to  the  practice  and  banking  etiquette  pre- 
vailing in  Germany,  an  issuing  firm  is  not  merely  justified 
but  positively  in  duty  bound,  by  the  requirement  of  the 
' '  care  of  an  ordinary  issuing  firm, ' '  to  effect  such  pur- 
chases of  its  own  issues.  This  practice  can  not  be  re- 
garded as  an  attempt  to  produce  an  artificial  rise  of  quo- 
tations or  to  effect  their  artificial  "regulation."  There  is 
always  the  danger  that  speculators  may  attempt,  imme- 
diately or  very  soon  after  the  issue,  to  depress  the  market 
value  by  speculative  sales  or  realizations,  while  there  may 
be  no  intrinsic  reason  for  a  decline.  To  guard  against 
this,  it  is  well  to  have  some  one  in  the  market  ready  to  take 
up  these  speculative  securities,  at  least  within  certain 
limits.  Of  course  this  precaution  must  not  be  carried  so 
far  that  speculators  might  be  encouraged  to  speculate  "on 
the  back ' '  of  this  very  syndicate  which  is  ready  to  purchase. 
The  execution  of  this  part  of  the  issuing  programme  thus 
requires  special  knowledge  of  the  bourse  and  special  cau- 
tion and  alertness. 


356 


The     German     Great    Banks 


The  considerations  here  sketched  have  to  be  applied  to 
a  greater  or  less  extent  before,  during,  and  after  each  issue. 
In  addition,  special  difficulties  may  arise  in  certain  cases, 
especially  in  connection  with  the  underwriting  of  foreign 
loans,  when  care  has  to  be  used  to  insure  against  fluctua- 
tions in  exchange,  or  against  the  thwarting  of  the  issuing 
operation  through  arbitrage  operations  of  domestic  or 
foreign  concerns,  made  possible  by  the  condition  of  the 
market. 

At  any  rate,  the  multitude  of  factors  to  be  taken  into 
consideration  in  this  field  suffices  to  show  how  incorrect  it 
is  to  suppose  that  this  important  branch  of  the  activity 
of  the  German  credit  banks  can  be  conducted  without 
corresponding  work,  sagacity,  and  prudence. 

There  have  been  cases  in  which  the  principles  controlling 
the  issue  of  foreign  loans  were  not  observed  by  German 
issuing  firms,  any  more  than  by  foreign  firms,  possessing 
much  longer  experience;  but  aside  from  these,  it  will  have 
to  be  admitted  that  in  the  immense  number  of  instances, 
especially  in  the  second  epoch,  there  were  but  very  few 
cases  in  which  the  issues  could  be  said  to  have  been  under- 
taken in  a  rash  or  otherwise  questionable  spirit.350 

The  prospectuses  published  for  the  purpose  of  issue, 
which,  it  must  be  said,  are  for  the  most  part  read  only 
afterward  and  only  when  something  unfavorable  has 
happened,  have  almost  invariably  contained,  in  conformity 
with  the  law,  the  data  necessary  for  forming  a  judgment 
regarding  the  intrinsic  value  of  the  securities  issued.  They 
have  also  abstained  from  any  undignified  advertising,  which 
for  that  matter  would  not  be  allowed  by  the  authorities  on 
whom  the  admission  to  the  bourse  depends. 


357 


National    Monetary     Commission 

The  German  credit  banks  know  from  their  own  expe- 
rience, or  from  that  of  other  banks,  that  nothing  is  likely 
to  injure  the  reputation  of  a  bank  so  severely  and  so  last- 
ingly among  its  customers  and  among  the  general  public, 
as  a  failure  to  discharge  in  the  most  conscientious  manner 
its  duties  in  connection  with  the  issue  of  securities.351 

(/3)  THE  EXTENT  OF  THE  GERMAN  ISSUE  BUSINESS. 

According  to  the  Deutscher  Oekonomist,  the  market 
value  of  all  the  capital  raised  in  Germany  by  way  of  issues 
since  1889  was  as  follows  (in  millions  of  marks) : 


i88o.  . 

.  .  ,74.1 

i8q4. 

I,  4.2O 

i8qq 

2  6l2 

IQO4. 

I  QQ'Z 

1800.  . 

.  .  ,  520 

i8q=; 

IQOO 

I  777 

•3  iqo 

1801  .  . 

.  .  ,  217 

i8q6.  . 

.  .  I,  8q6 

IQOI 

I  62  ^ 

1006 

2  74.1 

i8q2 

016 

1807 

I  QA.A. 

iqo2 

2  I  IO 

IOO7 

2  I  ^  S 

I8q3.  . 

..  ,266 

1808.  . 

.  .2.  4.O7 

.1.66=; 

I008.  . 

.  .  •?.  /tie 

From  1883  to  the  end  of  1907,  there  were  issued  in 
Germany  securities  to  the  selling  value  of  40,000,000,000 
marks  in  round  figures. 

For  the  years  1900-1907  both  the  Frankfurter  Zeitung 
and  the  Deutscher  Oekonomist  have  arranged  the  issues 
by  classes  of  securities,  in  the  tables  reprinted  in  the  fol- 
lowing pages. 


358 


The     German     Great    Banks 


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GERMAN  SECURITIES 

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Mortgage  bonds  
Railway  bonds  
Industrial  bonds  

359 


National    Monetary     Commission 


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360 


The     German     Great    Banks 


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361 


National     Monetary     Commission 


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Grand  total  .... 

362 


The     German     Great    Banks 

In  these  tables352  the  amounts  of  shares,  bonds,  and 
mortgage  bonds  set  down  are  those  officially  reported  in 
the  market.  It  is  important,  however,  to  note  that  the 
following  were  omitted:  Conversions;  issues  effected  pri-\ 
vately,  outside  of  the  official  market  (which  were  only 
stated  when  they  were  advertised  in  public  journals) ; 
mere  introductions  of  securities  already  quoted  at  Ger- 
man bourses;  finally,  new  securities  which  made  no  de- 
mands on  the  market,  inasmuch  as  they  were  issued 
solely  for  the  purpose  of  exchange  against  shares,  etc.,  . 
of  another  enterprise. 

The  figures  given  by  the  Frankfurter  Zeitung  are  seen 
to  differ  from  those  of  the  Deutscher  Oekonomist  very 
considerably,  both  in  the  enumeration  of  the  different 
classes  of  securities  and  in  the  amounts  under  the  head  of 
the  same  classes  of  securities.353 

A  word  of  explanation  is  required  in  regard  to  the  issues 
of  foreign  state  loans  (see  article  2  n.  G.  2d, below),  noted 
in  both  tables,  because  on  the  authority  of  these  tables 
the  complaint  has  been  made,  even  before  the  Bank  Inquiry 
Commission,  that  these  issues  have  evidently  had  a  decided 
effect  in  making  our  balance  of  payment  more  unfavorable. 

The  prospectuses  thus  far  issued  concerning  the  intro- 
duction of  foreign  securities  at  the  bourse  give  no  indica- 
tion of  the  amounts  that  have  really  been  placed  in  Ger- 
many. On  the  contrary,  according  to  the  regulations 
for  listing  hitherto  in  force,  the  entire  foreign  loan, 
even  if  it  was  offered  simultaneously  in  different  places  at 
home  and  abroad,  had  to  be  noted  at  the  German  bourse, 
for  example,  in  Berlin,  even  when  only,  say,  one-third  of 
the  entire  loan  was  intended  to  be  placed  in  Germany  and 

363 


National     Monetary     Commission 

was  so  placed.  It  is  true  that,  in  virtue  of  this  notation, 
the  other  two-thirds  also  had  acquired  ' '  the  right  of  domi- 
cile in  Germany, ' '  as  one  member  of  the  Bank  Inquiry 
Commission  expressed  it.  However,  the  effect  of  this 
favors  not  only  the  foreign  country,  which  in  such  case 
might  throw  on  the  German  market  the  two-thirds  placed 
in  that  foreign  country,  but  it  also  favors  Germany, 
because  the  one-third  actually  paid  for  in  Germany  may 
also  be  utilized  abroad,  if  desired,  since  the  conditions 
of  listing  at  the  foreign  bourses  are  as  a  rule  identical 
with  those  in  Germany. 

If  we  were  to  change  our  regulations  for  listing, 
foreign  countries  would  doubtless  do  the  same,  and  the 
consequence  would  be  that  the  foreign  market  would  be 
closed  to  us  as  regards  the  part  of  the  foreign  loan  placed 
in  Germany,  a  result  which  might  be  attended  with  grave 
consequences  in  critical  times  and  in  time  of  war. 

Furthermore,  in  regard  to  the  statements  made  in  the 
tables,  it  is  to  be  noted  that  foreign  countries,  if  they 
expect  a  profit,  also  partake  of  the  foreign  loans  placed 
in  Germany.  It  must  also  be  remembered  that  foreign 
securities  always  tend  to  return  to  the  home  country,  as 
was  extensively  illustrated  in  the  case  of  the  Austrian, 
and  in  recent  years  also  in  the  case  of  the  Italian  securities. 

How  large  a  part  of  any  foreign  loan  has  been  perma- 
nently placed  in  Germany  can  thus  not  easily  be  esti- 
mated, and  this  is  the  reason  why  the  two  tables  (see 
note  353  on  p.  837)  differ  so  much. 

(6)  THE  ISSUING  OF  INDUSTRIAL  SECURITIES.354 
The  business  of  issuing  industrial  securities  is  the  key- 
stone of  the  vast  structure  of  the  industrial  relations 
between   banks   and   industry,  whose  foundation  is  the 


The     German     Great    Banks 

current-account  business.  The  reverse  process,  namely 
the  case  in  which  the  issue  of  new  securities  of  an  enter- 
prise transformed  into  a  stock  company  becomes  the 
bridge  for  a  regular  current  account  and  credit  business 
between  the  two  parties,  is  of  much  rarer  occurrence.  The 
dangers  to  the  banks  arising  from  both  classes  of  busi- 
ness are  equally  great,  being  perhaps  even  greater  in  the 
current-account  business,  for  the  simple  reason  that,  as 
we  saw,  no  fixed  rules  for  industrial  credit  have  yet 
been  developed  in  the  German  banking  business,  assuming 
even  that  such  rules  could  possibly  be  evolved.  On  the 
contrary,  the  technique  of  the  issuing  business,  its  premises 
and  limits,  have  become  more  and  more  familiar  to  the 
German  credit  banks,  often  through  sad  experience.  Then- 
details  are  thus  well  known,  both  as  regards  the  issue  of 
new  securities  of  an  existing  enterprise  to  be  transformed 
into  a  stock  company  (which,  according  to  art.  41  of  the 
bourse  law  can  take  place  only  one  year  after  the  entry 
of  the  company  on  the  register  and  after  the  publication 
of  the  first  balance  sheet) ,  or  those  of  a  new  enterprise,  or, 
finally,  those  arising  from  an  increase  of  capital,  fusion,  or 
reorganization.  Of  course  the  risk  in  the  issuing  business 
will  be  less  when  the  bank  acts  merely  as  broker,  that  is 
to  say,  on  account  of  the  industrial  enterprise,  though  in 
its  own  name. 

Speaking  of  reorganizations,  it  may  be  remarked  that 
the  German  credit  banks,  especially  the  great  banks,  have 
rendered  important  service  in  that  direction  to  distressed 
enterprises,  as  well  as  to  the  public  in  general,  especially 
during  the  second  epoch.  After  effecting  the  reorgani- 
zation, which  often  involved  great  expenditure  of  time, 


365 


National    Monetary     Commission 

capital  and  labor,  and  could  only  be  carried  out  in  the 
face  of  great  difficulties  and  opposition,  the  banks,  by 
staking  their  own  issuing  credit,  restored  the  earning 
capacity  of  the  reorganized  enterprises  and  put  an  end  to 
the  prevailing  disorder  in  the  trading  of  shares,  bonds,  and 
mortagages.  This  was  illustrated  not  only  by  -the  reor- 
ganizations of  the  Berlin  mortgage  institutions,  effected 
by  the  cooperation  of  all  the  great  banks  and  banking 
houses  of  Berlin,  after  the  collapse  of  1901,  but  also  by  a 
series  of  other  reorganizations,  such  as  those  of  the 
Lothringischer  Hiittenverein  Aumetz-Friede  and  the  Dif- 
ferdinger  Gesellschaft  (now  Deutsch-IyUxemburgische 
Bergwerks-  und  Hiitten-Aktiengesellschaft  in  Bochum 
und  Differdingen) .  After  their  financial  and  technical 
reconstruction,  these  companies  contributed  materially 
toward  raising  the  pig-iron  industry  of  Luxemburg  and 
Lorraine  to  its  present  commanding  position. 

On  the  whole,  however,  the  relations  of  the  banks  to 
jndustry  take  the  slower  way  of  current-account  credit 
grid  the  many  forms  of  short-term_crg^^ajbove_described , 
in  which  the  temporary  demand  for  operating  credit  is 
satisfied.  Only  little  by  little  is  the  long-term  credit  de- 
veloped which  finds  its  natural  commercial  expression  in 
the  issue  of  shares  and  bonds. 

By  such  an  issue  the  connection  between  the  banks  on 
the  one  hand,  as  principal  representatives  of  the  capi- 
talist system  of  economic  organization,  and  industrial  pro- 
duction on  the  other  hand,  is  drawn  so  tight  that  they  are 
thereafter  joined  "for  better  or  worse."  Sooner  or  later 
this  connection  finds  further  expression  in  the  appoint- 
ment of  members  of  the  bank  directorate  to  the  supervis- 


366 


The     Great     German    Banks 

ory  council  of  the  industrial  enterprises,  while  occasionally 
some  "captains  of  industry"  are  appointed  as  members 
of  the  supervisory  councils  of  banks.  The  former  practice, 
..as  was  pointed  out  elsewhere,  is  virtually  caused  by  the 
necessity  for  the  banks  to  maintain  the  influence  which 
they  have  gained  through  the  issue;  also  by  a  regard  for 
their  issue  credit,  which  makes  it  the  duty  of  the  bank, 
according  to  the  well-established  and  sound  practice  of 
German  banking,  to  retain  such  permanent  control.  The 
converse  practice — that  is  to  say,  the  appointment  of  lead- 
ing personalities  of  an  industry  as  members  of  the  super- 
visory boards  of  banks,  where,  as  a  rule,  they  have  much 
less  influence  than  the  representatives  of  banks  in  the 
management  of  industrial  companies — is  not  merely  an  act 
of  courtesy  toward  the  latter,  but  also  the  manifestation 
of  the  mutual  desire  for  an  outward  expression  of  the 
close  business  relations  that  have  been  established  and 
the  expression  of  a  desire  on  the  part  of  industry  to  main- 
tain the  closest  possible  agreement  in  views  and  aims  as 
regards  the  industrial  policy  of  the  banks. 

Appendix  IV  gives  a  statistical  view  of  the  extent  to 
which  such  permanent  contact  between  the  two  parties, 
in  mutual  desires,  demands,  and  interests,  has  been  estab- 
lished during  the  second  epoch  by  the  appointment  of 
representatives  of  the  great  banks  to  the  supervising 
boards  of  industrial  companies.  The  table  also  shows  the 
extent  and  degree  of  intimacy  (manifested  especially  in  the 
filling  of  the  office  of  president)  of  the  industrial  relations 
of  the  great  banks  to  the  several  branches  of  industry.355 
This  form  of  "friendly"  relations  through  the  filling  of 
positions  on  the  supervisory  board,  it  must  be  confessed, 

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National    Monetary     Commission 

was  sometimes  effected  only  after  considerable  unpleas- 
ant argument,  as,  for  instance,  when  the  Dresdner  Bank 
gained  two  places  on  the  supervisory  board  of  the 
Laurahutte.356 

The  slow  and  laborious  work  which  often  has  to  precede 
the  moment  at  which  the  question  of  an  issue  becomes 
practical  can  not  be  too  highly  estimated  as  regards  its 
economic  value.  The  cautious  forward  movement,  step 
by  step  and  stage  by  stage,  of  a  private  industrial  enter- 
prise or  an  industrial  stock  company,  that  may  have  been 
founded  by  the  aid  of  a  bank,  toward  higher  and  higher 
aims  is  aided  by  a  gradually  growing  current-account  and 
acceptance  credit  in  proportion  as  the  yearly  surplus  from 
operation  does  not  suffice  for  the  necessary  reconstruction 
and  additional  construction.  The  burden  of  interest  thus 
imposed  on  the  enterprise  is  in  the  nature  of  things  ac- 
commodated to  the  state  of  improvements  or  enlarge- 
ments of  the  time  being.  The  larger  and  permanent 
investment  credit  subsequently  granted  to  the  strength- 
ened enterprise  is  merely  the  natural  closing  act  of  this 
process  of  healthy  and  organic  development  assuming  the 
form  of  an  issue  of  stocks  or  bonds.  Examples  of  this 
may  be  found  in  abundance  in  the  connections  of  every 
great  bank  with  industrial  enterprises  especially  in  the 
mining,  machinery,  and  electrical  industries. 

On  the  other  hand,  the  banks  have  found  an  especially 
important  and  extensive  field  of  activity  in  the  promotion 
of  industrial  combinations,  consolidations,  and  fusions, 
which,  as  a  rule,  are  carried  out  exclusively  or  preferably 
through  the  agency  of  issue  credit.  This  tendency  of  the 
business  policy  of  industrial  enterprises,  manifested  in 


368 


The     German     Great    Banks 

various  ways  even  during  the  first  epoch,  became  especially 
pronounced  in  the  second  epoch  through  the  development 
of  the  cartels.  Thus,  as  early  as  1853  the  Phonix  Com- 
pany in  Ivaar,  established  as  a  stock  company,  arose  from 
a  combination  of  four  iron  furnaces  and  the  Nassau  iron- 
ore  mines.  In  1898,  with  the  powerful  aid  of  the  banks, 
it  absorbed  the  Westfalische  Union.357  Similarly,  the 
Horder  Verein,  founded  in  1852,  decided  in  1864  to  under- 
take the  introduction  of  the  Bessemer  process,  and  accord- 
ingly acquired  a  number  of  iron-ore  mines  (Kleineisen- 
steingruberi) .  The  possession  of  these,  however,  ceased  to 
be  a  necessity  when  the  Horder  Verein,  with  the  assist- 
ance of  the  banks,  acquired  in  1879  the  Thomas  and  Gil- 
christ  patents.358 

Again,  the  great  increase  in  the  number  both  of  the 
so-called  "  furnace  mines  "  (Huttenzecheri) — that  is  to  say, 
iron  furnaces  which  acquired  coal  mines — and  of  the  so- 
called  "mine  furnaces"  (Zechenhiitteri) — that  is  to  say, 
coal  mines  which  acquired  iron  furnaces — during  the  sec- 
ond epoch  was  in  many  cases  rendered  possible  only  by 
the  aid  of  the  issue  credit  of  banks.  The  same  was  true 
of  the  so-called  combined  plants,  which  became  necessary 
after  the  introduction  of  the  Thomas  process  and  which 
gave  to  them  so  great  a  superiority  over  the  so-called 
"pure  works"  (reine  Werke),  whose  condition  became 
more  and  more  difficult. 

In  the  same  way  the  banks  promoted  the  great  number 
of  fusions,  whose  object  was  either  to  get  rid  of  trouble- 
some competition,  to  combine  successive  stages  in  the 
process  of  production,  or  to  diminish  the  cost  of  produc- 
tion.359 Such  fusions  were  especially  frequent  in  the  min- 


90311°— n 25  369 


National    Monetary     Commission 

ing  industry;  for  instance,  in  the  case  of  the  Gelsenkirchen 
Mining  Company  and  in  the  electrical  industry,  which 
from  the  very  beginning  was  in  close  touch  with  the 
banking  interest. 

The  regular  current-account  connection  of  the  banks 
with  the  great  industrial  establishments  gradually  led  to 
the  result  that  the  influence  of  private  banking  houses, 
till  then  considerable,  was  crowded  into  the  background, 
despite  the  long-continued  business  connection  between 
these  private  banks  and  industry.  The  issue  business 
of  the  banks,  which  required  larger  and  larger  capital  and 
increasingly  permanent  investments — that  is  to  say,  the 
assumption  of  a  great  and  long-continued  promoter's  risk — 
tended  still  more  to  weaken  and  eliminate  the  medium- 
and  small  sized  private  banking  houses,  a  process  which 
extended  far  beyond  the  limits  of  the  individual  indus- 
trial districts,  and  which  was  intensified  and  accelerated 
in  a  marked  degree  by  the  above-mentioned  provision 
of  the  bourse  law  (art.  39,  now  41). 

The  assumption  of  fiscal  agencies  (Zahlstelleri)  for  the 
payment  of  dividends  and  interest  on  bonds  and  for 
the  redemption  of  drawn  bonds,  though  at  times  un- 
connected with  any  issue,  may  nevertheless  be  regarded 
as  an  incidental  effect  of  the  issuing  business,  tending  to 
promote  not  so  much  the  process  of  concentration  as  the 
profits  of  the  banks,  but  at  the  same  time  leading  occa- 
sionally to  new  current-account  connections.  Hence,  so 
long  as  the  requisite  caution  is  observed,  the  fiscal  agen- 
cies, combined  with  the  positions  on  the  supervisory 
boards,  supply  a  means  whereby  the  industrial  connec- 
tions of  the  great  banks  may  be  measured.  From  the  lists 


370 


The     German     Great    B 


a  n 


of  the  six  great  banks  of  Berlin  for  1903-4  Otto  Jeidels  as- 
certained the  following  numbers  of  industrial  fiscal  agencies 
of  these  banks,  which,  however,  are  probably  incomplete 
(especially  as  regards  the  Disconto-Gesellschaft  and  the 
Berliner  Handelsgesellschaft) :  36° 

Number  of  fiscal  agencies. 

1 .  Deutsche  Bank 250 

2.  A.  Schaaffhausen'scher  Bankverein 211 

3.  Dresdner  Bank 191 

4.  Darmstadter  Bank 161 

5.  Disconto-Gesellschaft in 

6.  Berliner  Handelsgesellschaft 95 

As  regards  the  class  of  industrial  securities  issued,  it 
may  be  said  that,  as  a  rule,  the  issue  of  shares  is  preferred 
for  obtaining  the  capital  for  permanent  improvements, 
while  the  issue  of  bonds  (redeemable  by  amortization 
within  a  fixed  period)  is  preferred  for  obtaining  the 
means  for  improvements  of  considerable  duration,  indeed, 
but  yet  terminating  after  the  lapse  of  a  certain  time.  It 
must,  however,  always  be  kept  in  mind  that  the  issue  of 
bonds,  unlike  the  issue  of  stock,  burdens  the  enterprise 
permanently  with  fixed  interest  charges,  so  that  it  re- 
quires great  caution.  According  to  Otto  Jeidels,  in  the 
case  of  the  six  great  Berlin  banks  above  named,  the  issues 
of  industrial  bonds  in  the  boom  period  of  1899  amounted 
to  about  one-fourth  of  all  syndicate  business  (40  bond 
issues  out  of  a  total  of  161  syndicate  participations), 
and  in  1901,  the  year  of  the  crisis,  as  much  as  four-fifths 
of  all  syndicate  participations  (83  out  of  ioi).361 

According  to  the  Deutscher  Oekonomist,   the  actual 
capital  raised  by  means  of  issues  of  German  industrij 
shares  was  as  follows  (in  millions  of  marks) : 


371 


National    Monetary     Commission 


1892  .... 

2.5 

•2  A 

1897.. 
l8q8 

...   266 

1902  .  .  . 

IQO^ 

.   184 
IPS 

1907  
iqo8 

••   431 

1  894-  ••• 

•     36 

I899. 
I9OO. 

...   276 
461 

1904.  .  . 
1905  .  .  . 

.  360 

552 

1806.  . 

.  2I.V 

iqOI. 

155 

iqo6.  . 

6.S2 

According  to  the  table  from  the  Deutscher  Oekonomist, 
given  above  (pp.  360  and  361),  the  actual  capital  raised 
in  the  shape  of  German  industrial  bonds  issued  from 
1900  to  1908  was  as  follows  (in  millions  of  marks) : 


1900 —  178.77 

1901 —  193-29 
1902 ....    158. 10 


1903. 
1904. 


64.  96 
no.  14 


1905...  115.24 

1906. . .    183. 10 


1907 —  172.79 

1908 —  314 


The  foreign  industrial  bonds  admitted  to  trading  at  the 
bourse  from  1897  to  1907  amounted  to  a  nominal  value 
of  135,100,000  marks,  of  which  6,300,000  marks  repre- 
sents the  value  of  converted  bonds  (Statistisches  Jahr- 
buch  fur  das  Deutsche  Reich,  29  Jahrgang,  1908,  p.  238). 

The  total  number  of  industrial  issues  by  the  six  great 
Berlin  banks362  in  the  nine  years  from  1895  to  1903  was 
as  follows : 


1895 

1896 

1897 

1898 

1899 

1900 

I9OI  . 

1902 

1903. 

Deutsche  Bank  

10 

i3 

13 

17 

19 

25 

17 

16 

20 

Disconto  -Gesellschaf  t 

IS 

9 

IS 

21 

23 

26 

19 

14 

9 

Darmstadter  Bank  .  . 

8 

7 

10 

27 

IS 

27 

14 

20 

20 

Dresdner  Bank  

25 

i? 

•7 

2S 

3i 

29 

14 

14 

IS 

A.      Schaaffhausen'- 

scher  Bankverein.  . 

25 

19 

21 

30 

So 

29 

18 

14 

14 

Berliner   Handelsge- 

sellschaf  t  

16 

16 

24 

24 

23 

22 

19 

15 

ii 

Finally  Jeidels  endeavored  to  ascertain  the  geographic 

distribution 363  of  the   industrial   relations   of  the   great 

banks  and  the  distribution^  by  classes  of  industries,  of  the 

Industrial  companies 364  connected  with  the  banks.,  both 

^ —  ,  fr^rn  tjip  data  regarding  their  representation  on  the  super- 


372 


The     German     Great    Banks 


visory  boards  arid  the  fiscal  agencies,  though  the  latter 
method  can  yield  no  reliable  results.  There  can  be  no 
doubt  that  the  distribution  of  industrial  relations  is  most 
regular  in  the  case  of  the  Deutsche  Bank  and  of  the  Dis- 
conto-Gesellschaft,  and  next  to  them  in  the  case  of  the  Ber- 
liner Handelsgesellschaft  and  the  Darmstader  Bank, 
although  the  latter  shows  on  the  whole  more  South  Ger- 
man and  (as  a  consequence  of  the  absorption  of  the  Bres- 
lauer  Disconto-Bank) ,  also  Silesian  industrial  relations, 
which  is  also  true  of  the  Deutsche  Bank.  The  industrial 
relations  of  the  Dresdner  Bank,  naturally,  are  mostly  with 
the  Kingdom  of  Saxony,  those  of  the  A.  Schaaffhau- 
sen'scher  Bankverein  with  Rhineland  and  Westphalia. 

The  distribution  of  the  industrial  relations  by  branches 
of  industry  is  most  regular  in  the  case  of  the  Deutsche 
Bank  and  the  Disconto-Gesellschaft,  both  banks  having 
extensive  relations  with  foreign  railway  companies,  and 
the  Deutsche  Bank  also  with  electrical  companies.  In  the 
case  of  the  Darmstadt er  Bank  the  relations  to  tramways 
and  breweries  predominate,  in  the  case  of  the  Berliner 
Handelsgesellschaft  the  relations  to  the  "heavy  indus- 
tries, "such  as  iron  and  other  metals  (schwere  Industrie), 
electric  companies,  and  tramway  enterprises. 

Among  particularly  close  connections  during  the  second 
epoch  we  may  mention  the  following: 

The  Deutsche  Bank  with  Siemens  &  Halske,  the  North 
German  Lloyd,  the  Hamburg- American  Steamship  Com- 
pany, the  Huldschinsky  Works,  the  Deutsche  Petroleum- 
Aktien-Gesellschaft,  the  German  and  Oversea  Electrical 
Company  (Deutsche-UeberseeischeElektrizitats-Gesellschaft) , 
the  Electric  Elevated  and  Underground  Railway  Com- 


373 


National    Monetary     Commission 

pany  (Gesellschaft  fur  Elektrische  Hoch-  und  Untergrund- 
bahneri) . 

The  Disconto-Gesellschaft  with  the  Gelsenkirchen  Min- 
ing Company  (Bergwerks-Aktien-Gesellschaft),  which  on 
January  i,  1905,  entered  into  community  of  interest  rela- 
tions with  the  Red  Earth  Furnace  Stock  Company  of 
Aachen  (Aachener-Hutten-Aktien-Verein  Rote Erde)  and  the 
Schalker  Mine  and  Furnace  Company  (Gruben-  und  Hutten- 
Verein)  the  Dortmunder  Union,  the  Aschersleben  Potash 
Works,  Ludwig  Loewe  &  Co.,  the  Machine  Factory  and 
Flour  Mill  Construction  Works  (Maschinenfabrik  und 
Muhlenbau-Anstalt)  Luther  in  Braunschweig. 

The  Dresdner  Bank  with  the  Kattowitzer  Mining  Com- 
pany, Felten  &  Guilleaume,  the  German-Austrian  Mining 
Company  (Dentsch-Oesterreichische  Bergwerks-Gesellschaft) , 
the  Lauchhammer  Stock  Company  and  the  Laurahutte. 

The  Berliner  Handelsgesellschaft  with  the  General 
Electric  Company  (Allgemeine  Elektrizitats-Gesellschaft)  the 
Harpen  Mining  Company  (Harpener  Bergbau-Gesellschaft) , 
the  Hibernia,  the  Consolidation  Mining  Company  (Berg- 
werksgesellschaft  Consolidation) ,  the  Upper  Silesian  Iron 
Industry  (Oberschlesische  Eisenindustrie) ,  the  Upper  Sil- 
esian Coke  Works  (Oberschlesische  Kokswerke) ,  the  Accum- 
ulator Works,  Limited  (Akkumulatoren-Fabrik  Aktien- 
Gesellschaft)  in  Berlin. 

The  A.  SchaafThausen'scher  Bankverein  with  Aumetz- 
Friede,  the  Harpen  Mining  Company  (Harpener  Bergbau- 
Gesellschaft)  ,  the  Hoesch  Steel  Works  (Stahlwerk  Hoesch) , 
the  Bochum  Union  (Bochumer  Verein — absorbed  in  1907 
by  the  Phonix) ,  the  Phonix,  the  Hoerder  Mining  and  Fur- 


374 


The     German     Great    Banks 


nace  Company  (Berg-werks-  und  Hutten-Vereiri),  the  Inter- 
national Exploration  Company  (Internationale  Bohrgesell- 
schaft),  the  Hercynia  Company  (Gewerkschaft  Hercynia). 

The  Darmstadter  Bank  with  the  German-Luxemburg 
Mining  and  Furnace  Company  (Deutsche-Luxemburgische 
Bergwerks-  und  Hutten-Aktien-Gesellschaft) ,  and  the  Peace- 
ful Neighbor  (Friedlicher  Nachbar),  the  A.  Riebeck 
Works  (A.  Riebeck 'sche  Montanwerke  Aktien-Gesellschaft 
in  Halle),  the  Company  for  Brewing  Industry  (Aktien- 
Gesellschaft  fur  Brauindustrie) ,  Griesheim-Elektron  Chem- 
ical Works  (Chemische  Fabrik  Griesheim-Elektron),  and 
the  Chemical  Works  formerly  H.  and  E.  Albert  (Chemische 
Werke  normals  H.  and  E.  Albert  (Biebrich). 

The  representatives  of  the  banks  on  the  supervisory 
boards  of  the  industrial  companies  have  always  taken 
special  care  to  fulfill  one  very  effective  part  of  the  "  advi- 
sory function  " 365  of  the  supervisory  board,  viz,  to  provide 
for  the  disposal  of  the  products  of  the  industrial  com- 
panies in  question  to  suitable  industrial  enterprises  on 
which  the  banks  were  able  to  exercise 'some  influence. 

As  regards  industrial  issues,  Eberstadt366  first  ascertains 
the  net  amount  received  by  any  particular  industry  from 
the  issues  undertaken  in  its  behalf,  which  amount  he  calls 
net  capital  claim  \Kapitalreinanspruch\ — (net  capital 
receipts  [Kapitalreinempfang]  would  be  a  more  correct 
term) — consisting  of  the  nominal  value  plus  the  (purchase- 
price)  — premium  or  minus  the  agio ;  whatever  goes  beyond 
that  "net  claim"  or  "net  receipts,"  as  a  result  of  a  rise 
in  the  market  value,  he  regards  as  pure  ' '  speculation, ' ' 
due  to  the  "gambling  propensity  of  the  public"  (p.  15). 


375 


National    Monetary     Commission 

In  this  way,  of  course,  he  arrives  at  enormous  ' '  speculative 
amounts. ' '  How  false  this  view  is  may  be  seen  at  once 
from  the  fact  that  the  quotations  of  any  particular  day, 
mostly  based  on  insignificant  transactions,  can  not  be 
regarded  as  a  measure  even  for  large  amounts,  let  alone 
the  entire  stock,  and  because  the  "speculators"  very 
largely  reinvest  the  profits  of  their  speculative  sales  in 
industry.  Above  all,  however,  the  statement  is  untrue 
because  the  quotation  depends  first  and  foremost  on  the 
varying  intrinsic  value  of  the  securities,  that  is  to  say,  on 
the  condition  of  the  enterprises  in  question,  and  does  not 
depend  on  the  * '  gambling  propensity ' '  either  solely  or 
even  in  large  part.367 

It  is  because  he  disregarded  the  above  considerations  that 
Bberstadt  was  able  to  arrive  at  the  conclusion  (p.  42)  that 
from  January  i,  1895,  to  April  i,  1900,  nearly  1,000,000,000 
marks,  that  is  to  say,  for  the  average  of  that  period  about 
186,500,000  a  year,  were  employed  solely  for  ' '  speculative 
purposes ' '  in  stock,  mining  and  smelting  enterprises  alone 
(he  does  not  even  include  "  Kuxe, '  'i.e.,  mining  shares) .  In 
contrast  with  this,  he  estimates  the  ' '  demand  for  capital 
by  industry ' '  for  the  same  period  and  for  the  same 
branches  of  industry  at  only  about  419,500,000,  or  about 
80,000,000  marks  a  year. 

The  latter  statement  is  as  erroneous,  and  moreover  as 
misleading,  as  the  former.  The  demand  for  capital  in  the 
mining  industry,  as  we  had  repeated  occasion  to  note  in 
speaking  of  the  economic  development  during  that  epoch, 
falls  far  short  of  the  amounts  supplied  by  issues,  which 
in  bad  years  are  only  possible  to  a  limited  degree  or  not 
at  all.  On  the  contrary,  it  is  supplied  also  by  way  of 


376 


The     German     Great    Banks 

current-account,  discount,  acceptance,  report  and  collat- 
eral credit,  etc.,  to  a  much  larger  extent  than  is  indicated 
by  Eberstadt.  It  is,  of  course,  difficult  to  ascertain 
the  amounts  thus  placed  at  the  disposal  of  industry  in 
general  and  of  the  mining  industry  in  particular,  either 
for  the  period  as  a  whole  or  for  each  year,  since  the 
amounts  in  question  are  not  separately  booked.  Certain 
it  is  that  they  always  played  a  great  part.  The  most 
summary  comparison  between  the  demand  for  short-term 
credit,  recorded  on  a  previous  page  for  a  number  of  in- 
dustries, with  the  amounts  of  credit  granted  during  that 
period,  suffices  to  show  that  the  issues  alone  came  no- 
where near  covering  that  demand,  and  that  the  banks 
throughout  that  period  granted  industrial  credit368  to  the 
utmost  possible  limit,  occasionally  even  to  a  degree  incom- 
patible with  a  sound  distribution  of  risk.389 

As  regards  the  financing  of  shares  arid  bonds  of  real 
estate  companies  (Terraingesellschaften) ,  it  may  be  said 
that  in  this  direction  the  great  banks  have  hitherto,  in 
many,  perhaps  most  cases,  not  pursued  any  far-sighted 
economic  aims,  and  that  to  a  large  extent  they  have  not 
concerned  themselves  with  the  great  questions  of  land 
policy. 

(c)  THE  FLOATING  OF  GERMAN  STATE  AND  COMMUNAL  LOANS. 

In  describing  the  development  of  the  German  banks 
during  the  first, epoch  (1848  to  1870),  we  saw  that  all 
the  great  banks  then  in  existence  regarded  it  as  an 
essential  part  of  their  program  and  business  policy  to 
take  part  in  the  business  of  floating  state  loans.  State- 


377 


National    Monetary     Commission 

ments  to  this  effect  are  found  in  some  of  the  early  annual 
reports  of  these  banks.370  On  page  62  we  gave  a  review 
of  the  most  important  state  and  communal  loans,  which 
were  taken  over  during  the  years  1854  to  1869  by  the 
Darmstadter  Bank  and  the  Disconto-Gesellschaft,  i.  e., 
the  two  leading  banks  of  that  period.  Success  in  this  field 
was  achieved,  however,  as  is  expressly  stated  in  the  jubilee 
report  of  the  Disconto-Gesellschaft371  in  the  face  of 
decided  "  opposition  on  the  part  of  the  old-established  and 
well-known  private  banking  houses,  which  until  then  had 
held  a  monopoly  of  the  financial  business  and  in  every 
manner  attempted  to  ward  off  the  invasion  of  the  new 
banking  companies."  The  banks  in  many  cases  won  in 
this  struggle  only  by  showing  a  far  greater  liberality 
toward  the  individual  States  and  communes  in  the  fixing 
of  the  terms  of  loans  and  in  reducing  the  hitherto  cus- 
tomary rates  of  brokerage.372  As  a  result  numerous  state 
loans  were  taken  over  even  during  the  first  period,  as  for 
instance,  loans  contracted  by  Prussia,  Bavaria,  Saxony, 
Wurtemberg,  Baden,  Brunswick,  Hamburg,  Bremen, 
Austria,  etc.,  as  well  as  municipal  loans  offered  by  Danzig, 
Worms,  Mannheim  and  others.  As  early  as  1859  a 
Prussian  mobilization  loan  of  30,000,000  thalers  was 
taken  over  by  the  Disconto-Gesellschaft  in  conjunction 
with  other  then  existing  Berlin  banks  and  banking 
houses,  this  joint  operation  being  the  forerunner  of  the 
"  Prussian  jsyndicate  "  (Preussenkonsortium)  subsequently 
formed  under  the  leadership  of  the  Seehandlung  (Prus- 
sian State  Bank).  This  syndicate  became  effective  in 


378 


The     German     Great    Banks 

1868,  when  it  took  over  Prussian  loans  to  an  amount  of 
45,000,000  thalers.  In  the  following  year  it  took  over  ad- 
ditional Prussian  loans  to  a  total  amount  of  5,000,000 
thalers,  made  necessary  by  the  annexation  agreement 
(Rezess)  with  the  erstwhile  free  city  of  Frankfort-on-the- 
Main. 

Between  the  years  1868  and  1901  the  Disconto- 
Gesellschaft,  the  Darmstadter  Bank,  and  other  credit 
banks,  as  well  as  a  number  of  private  banking  houses,  at 
times  with  the  partial  cooperation  of  the  Seehandlung, 
took  over  and  issued  255,000,000  marks  of  Bavarian  State 
loans  alone.  As  regards  the  war  loan  of  August  3  and  4, 
1870,  amounting  to  120,000,000  thalers,  its  issue  was 
effected  without  the  cooperation  of  the  banks  by  means 
of  a  national  subscription  at  the  rate  of  88  per  cent.  The 
jubilee  report  of  the  Disconto-Gesellschaft  mentions  on 
page  35  that  at  the  preliminary  negotiations  regarding 
this  loan,  held  in  the  Prussian  ministry  of  finance,  the 
two  representatives  of  German  banks  and  banking  firms 
present  declared  "that  the  success  of  this  loan  could  be 
assured  only  in  case  it  was  issued  at  a  rate  of  85  per  cent." 

The  report  continues: 

"This  rate  was  recommended  upon  the  plain  business 
consideration  that  the  issue  price  would  have  to  be  fixed 
on  a  parity  with  the  market  prices  then  quoted  for  similar 
Prussian  state  securities.  The  authorities,  however, 
reckoned  only  with  the  prevailing  national  sentiment  and, 
disregarding  the  actual  conditions  of  the  money  market, 
fixed  the  subscription  price  at  88  per  cent.  The  result 
was  that  the  nominal  amount  subscribed  on  the  two 
subscription  days,  August  3  and  4,  did  not  exceed 


379 


National    Monetary     Commission 

68,000,000  thalers,  which  at  the  subscription  price  of  88  per 
cent  yielded  a  net  amount  of  only  60,000,000  thalers."373 

In  October,  1870,  a  funded  federal  loan  of  20,000,000 
thalers  was  issued  with  better  regard  for  the  condition  of 
the  money  market.  In  November,  1870,  and  January, 
1871,  additional  war  loans  totaling  142,000,000  thalers 
were  issued  in  the  form  of  5  per  cent  treasury  bills,  payable 
in  five  years.  These  loans  were  taken  over  and  placed 
by  a  German  syndicate  of  banks  and  banking  houses  with 
the  collaboration  of  English  banks.  No  use  was  made 
of  the  last  war  credit  of  120,000,000  thalers  (law  of  April 
26,  1870)  because  of  the  receipt  of  part  of  the  French  war 
indemnity. 

Between  1871  and  1880  no  less  than  640,000,000  Prus- 
sian and  142,000,000  Imperial  loans  were  taken  over  and 
^issued  by  the  Prussian  syndicate  and  by  the  other  syndi- 
cate for  the  loans  of  the  Empire.  The  total  amount  of 
public  loans  underwritten  and  placed  by  syndicates  of 
banks  and  banking  houses  on  behalf  of  Hanseatic  towns, 
and  the  States  of  Wurttemberg,  Saxony,  and  Hessen 
reached  nearly  1,000,000,000  marks. 

After  1880,  notwithstanding  the  successful  experience 
had  with  the  old  method,  it  was  thought  that  in  order  to 
prevent  the  growth  of  a  monopoly  of  banks  and  banking 
houses  it  would  be  feasible  to  place  a  large  portion  of 
newly  issued  Prussian  and  other  State  loans  with  the 
various  applicants  by  way  of  competitive  subscription  (im 
Wege  freier  Begebung).  The  result  was  in  the  main 
merely  a  considerable  depression  in  the  market  and  of 
the  prices  of  German  State  bonds. 


380 


The     German     Great    Banks 

In  February,  1899,  the  Deutsche  Bank  alone  took  over  * 
75,000,000  marks  of  3  per  cent  Imperial  bonds  and  125,- 
000,000  marks  of  3  per  cent  Prussian  consols. 

In  September,  1900,  the  entire  amount  of  80,000,000 
marks  of  4  per  cent  treasury  bills,  payable  in  3^  to  5 
years,  was  awarded  to  the  New  York  banking  house  of 
Kuhn,  Loeb  &  Co.  This  measure  was  strongly  criticized, 
notwithstanding  the  fact  that  the  German  money  market 
as  a  result  was  greatly  relieved  by  the  influx  of  gold 
from  abroad. 

The  amount  of  German  communal  loans  issued  during 
this  period  in  which  the  Disconto-Gesellschaft  partici- 
pated— and  this  for  40  cities  only,  specified  in  the  jubilee 
volume,  page  42 — up  to  the  end  of  1900,  was,  in  round 
figures,  300,000,000  marks,  while  the  amount  of  mortgage 
bonds  of  cooperative  land  credit  associations  (landschaft- 
liche  Pfandbriefe)  and  provincial  and  district  loans  (Pro- 
mnz-  und  Kreisanleiheri)  issued  during  that  period  with 
the  cooperation  of  the  Disconto-Gesellschaft  reached 
almost  1,000,000,000  marks. 

Combining  domestic  State  and  communal  loans  issued 
during  the  last  15  years  of  the  second  period,  we  find  the 
following  totals,  according  to  the  Deutscher  Oekonomist: 

Net  amounts  realized  (effective  Betrage)  in  millions  of  marks. 


1894 295 

i895 139 

1896 160 

1897 167 


1898 261 

i»99 660 

1900 420 

1901 799 


1902 733 

1903 526 

1904 575 

1905 687 


1906 985 

1907 972 

1908 i»770 


The  net  amounts  of  German  state  loans  only,  as  distinct 
from  German  communal  loans,  issued  yearly  during  the 
important  period  1900  to  the  end  of  1908,  according  to  the 


381 


National    Monetary     Commission 

statements  of  the  Frankfurter  Zeitung,  printed  above  on 
pages  359  and  361,  as  well  as  of  the  Deutscher  Oekono- 
mist,  were  in  thousands  of  marks : 


Year. 

Figures  of  the  — 

Year. 

Figures  of  the  — 

Frankfurter 
Zeitung. 

Deutscher 
Oekonomi  st  . 

Frankfurter 
Zeitung. 

Deutscher 
Oekonomist. 

1900  
1901  
1902  

172,  500 
506,  oio 
532,  820 
343,36o 
283,870 

200,  400 
505,570 

536,  400 
317,630 
335,640 

1905  
1906 

454,68o 
668,970 
541,  060 
i,  079,  ooo 

429,  660 
638,  no 

546,  220 
I.  258,990 

1907  
1908  

1904  

This  is  not  the  place  to  discuss  the  causes  of  the  enor- 
mous growth  in  the  yearly  issues  of  state  loans.  Suffice  it 
to  say  that  the  constant  pressure  weighing  on  the  market 
of  imperial  and  state  loans  already  issued  or  about  to  be 
issued  has  been  one  of  the  main  causes  of  the  low  market 
prices  of  German  imperial  and  state  issues,  prices  which  in 
no  way  corresponded  to  their  intrinsic  value.  Neither  did 
the  reduction  of  the  interest  rate  from  3^  to  3  per  cent 
tend  to  commend  these  securities  to  German  investors, 
who  were  used  to  a  higher  interest  rate  paid  by  various 
solid  industrial  securities  and  in  most  cases  could  not 
afford  such  a  low  yield  on  their  capital. 

The  German  communal  loan  issues  during  the  same 
period  are  given  in  the  following  table,  which  states  in  par- 
allel columns  the  data  of  the  Deutscher  Oekonomist  and 
those  of  the  Frankfurter  Zeitung.  The  latter,  however, 
includes  under  the  same  head  loans  issued  by  cities  and 
provinces : 


382 


The     German     Great    Banks 

Net  amounts  realized  (effective  Betrdge}  on  German  communal  loans  during 

1900-1908. 

[In  thousands  of  marks.] 


Year. 

Figures  of  the  — 

Year. 

Figures  of  the  — 

Deutscher 
Oekonomist. 

Frankfurter 
Zeitung. 

Deutscher 
Oekonomist. 

Frankfurter 
Zeitung. 

1900  
1901  

220,350 
293.  580 

318,  160 
352,050 

1905  
1906  

257,400 
347,000 
425,  440 
5H.7IO 

418,450 
429,790 
496,  660 
606,  430 

1903  
1904  

208,  560 
239,  480 

340,480 
216,  770 

1908  

A  comparison  of  the  annual  amounts  of  communal 
loans  with  those  of  state  loans  discloses  the  striking  fact 
that  the  former  differ  in  size  but  little  from  the  latter. 
There  is  no  doubt  that  many  of  our  communes  have 
become  obsessed  during  the  recent  period,  especially 
during  the  last  decades,  by  a  sort  of  mania  of  greatness. 
As  Waldemar  Miiller 374  says,  "  Every  mayor  thinks  he 
has  failed  to  live  up  to  the  requirements  of  his  office  if  he 
does  not  borrow  a  million  every  couple  of  years  for 
slaughterhouses,  sewers,  the  construction  or  purchase  of 
electric  plants  and  city  railways,  nay,  even  for  paving  and 
schoolhouses,  the  expenses  for  which  ought  to  be  de- 
frayed out  of  current  revenues." 

At  all  events,  considering  the  large  amounts  added  to 
German  communal  loans  almost  every  year,  of  which  by  L-- -~" 
far  the  larger  portion  has  been  taken  over  and  emitted 
by  the  German  banks,  it  can  not  be  seriously  contended 
that  in  this  field  the  German  banks  have  not  taken  suffi- 
cient care  of  the  "domestic  market." 


383 


National    Monetary     Commissio 


n 


(d)  THE  FLOATING  OF  FOREIGN  SECURITIES. 
(a)  Principles  underlying  the  -flotation  of  foreign  securities. 

In  section  7  of  this  part  (p.  527  and  foil.)  an  attempt  is 
made  to  answer  the  question,  whether  the  so-called  "export 
capitalism"  is  to  be  regarded  as  necessary,  admissible,  and 
unobjectionable  on  general  principles,  and  in  particular 
beyond  the  amount  required  to  compensate  for  the  ex- 
cess of  imports  over  exports.375  In  that  section,  however, 
the  above  question  is  discussed  and  answered  only  as  a 
matter  of  principle,  while  in  the  present  chapter  we  are 
concerned  with  the  question,  what  special  principles 
are  to  govern  the  issue  of  foreign  securities,  and  what 
limits  are  to  be  drawn  in  this  field. 

In  my  opinion  the  three  fundamental  requirements  for 
a  sound  policy  in  this  regard  are  as  follows : 

(1)  The   issue    of   foreign    securities    in   the    domestic 
market,  like  the  establishment  of  branches  of  domestic 
enterprises  and  participations  abroad,  is  permissible  only 
after  the  domestic  demand  for  capital  has  been  fully 
Jatisfied,  since  the  first  duty  of  the  banks  is  to  use  the 
Ivailable  funds  of  the  nation  for  increasing  the  national 
jproductive  and  purchasing  power  and  for  strengthening 
fthe  home  market. 

(2)  International  commercial  dealings  as  well  as  inter- 
'•   national  flotations  ought  to  be  but  the  means  for  attaining 
J  national  ends  and  must  be  placed  in  the  service  of  national 

labor. 

(3)  Even   when   the   two   foregoing    conditions    have 
been  fulfilled,  the  greatest,  care  will  have  to  be  used  in 
selecting  the  securities  to  be  floated.     Our  experience  in 


384 


The     German     Great    Banks 

the  eighties  with  Argentine,  Greek,  Portuguese,  Chilean, 
Servian,  and  similar  securities  proves  the  paramount 
necessity  of  drawing  a  sharp  distinction  between  individual 
countries  and  securities. 

It  may  be  granted  that  so  far  as  the  eighties  are  con- 
cerned, when  we  entered  that  particular  field  in  competi- 
tion with  other  nations,  we  obtained,  in  the  main,  only 
those  foreign  loans  which  the  other  countries,  with  their 
old  established  international  relations,  either  had  left 
to  us  or  at  least  did  not  seriously  contest,  and  that  for 
these  reasons  our  choice  was  confined  within  rather  nar- 
row limits. 

At  present,  when  as  the  result  of  slow,  careful,  and  labor- 
ious efforts,  our  financial  relations  with  foreign  countries 
have  improved  to  a  gratifying  extent,  we  must  more  than 
ever  be  careful  to  underwrite  as  a  rule  only  securities  of 
such  countries  as  possess  what  may  be  called  a  rich  and 
extensive  "hinterland,"  either  in  the  shape  of  good 
colonies  or  of  large  provinces  presenting  a  hopeful  field 
for  agricultural,  industrial,  and  commercial  enterprise, 
or  countries  which  possess  strong  reserves  in  other  shape 
and  are  thus  in  a  position  to  endure  and  speedily  emerge 
from  hard  times. 

Furthermore,  whenever  practicable  and  in  so  far  as  we 
are  not  bound  by  previous  engagements  toward  foreign 
countries,  the  time  and  amounts  of  underwriting  as  well 
as  the  interest  rates  on  foreign  loans  should  be  fixed  with 
due  regard  to  the  economic  and  financial  conditions  pre- 
vailing at  home.  In  particular  (barring  those  previous 
engagements  just  mentioned),  in  times  of  industrial 
prosperity,  a  proper  regard  for  the  discount  policy  of  the 

90311° — ii 26  385 


National    Monetary     Commission 

Reichsbank  and  for  our  balance  of  payments  37e  should 
induce  our  banks  to  show  the  utmost  conservatism  in 
the  flotation  of  foreign  securities  and  in  the  granting  of 
long-term  credits  to  foreign  countries,  a  principle  which 
has  not  always  been  sufficiently  observed  by  the  German 
credit  banks.  Still,  in  criticising  the  methods  used  here- 
tofore, we  must  bear  in  mind  that,  when  a  foreign  coun- 
try, possibly  after  a  long  interval,  applies  to  us  for  urgently 
required  funds,  at  a  time  deemed  opportune  to  itself,  it  is 
only  in  the  rarest  instances  that  we  shall  be  in  a  position 
to  say  that  the  time  is  not  opportune  for  us  and  that  the 
applicant  had  better  call  at  some  other  time.  Such  a 
procedure  might  result  not  only  in  spoiling  our  relations 
to  the  respective  foreign  country,  but  eventually  in  the 
loss  of  our  entire  position  in  the  international  market. 
Furthermore,  in  cases  where  the  purpose  of  the  loan 
permits  it,  such  pressure  as  we  are  able  to  exert  should  be 
brought  to  bear  in  order  to  provide  in  the  loan  contract 
that  any  orders  for  works  and  contracts,  the  expense 
of  which  is  to  be  defrayed  by  the  loan,  be  placed  in 
Germany,  in  the  interest  of  our  industry. 

As  the  jubilee  report  of  the  Disconto-Gesellschaft  justly 
remarks  (p.  45),  it  was  "precisely  the  action  of  the  banks 
in  underwriting  foreign  loans  and  introducing  them  to  the 
German  market  that  proved  so  signally  effectual  in  pro- 
moting the  development  of  German  industry."  Thus, 
among  other  things,  the  Russian,  Austrian,  Hungarian, 
Portuguese,  and  Roumanian  railway  loans  oLthejaineties, 
as  well  as  the  financing  of  the  Venezuelan,  Anatolian,  and 
Bagdad  railways,  the  constructions  at  the  Iron  Gate,  the 
long-continued  work  carried  on  by  the  Shantung  Railway 

386 


The     German     Great    Banks 

and  Mining  Companies,  have  brought  to  German  indus- 
try a  large  number  of  lucrative  orders.  In  other  cases, 
however,  as  a  result  of  political  and  competitive  con- 
ditions, all  efforts  to  secure  a  participation  of  German 
industry  have  failed,  though  on  some  particularly  oppor- 
tune occasions,  as  for  instance,  that  of  the  Kongo  Rail- 
way,377 the  banks  insisted,  as  a  condition  of  their  own 
financial  cooperation,  that  German  industry  be  given  a 
share  in  the  work. 

On  the  whole,  despite  painful  experience,  we  have  to 
agree  with  Schmoller's  general  conclusion  378  that,  in  order 
to  maintain  and  strengthen  her  position  in  the  world 
markets,  Germany  will  have  to  increase  rather  than  re- 
strict her  foreign  financial  business,  provided,  of  course, 
the  above  stated  general  and  special  requirements  are 
observed. 

Other  countries  have  had  just  as  bad  if  not  a  worse  ex- 
perience in  this  field ;  moreover  it  goes  without  saying  that 
the  mastering  of  all  the  difficulties  in  this  field  requires 
an  apprenticeship.  This  point  seems  to  have  been  largely 
overlooked  by  Sartorius  Freiherr  von  Waltershausen  in 
his  otherwise  valuable  work  entitled  "The  economic  sys- 
tem of  investments  of  capital  abroad."  379  The  sugges- 
tions made  in  that  book  are  largely — notwithstanding  his 
denial — the  mere  expression  of  a  strong  and,  in  my  opin- 
ion, wholly  groundless  lack  of  confidence  in  the  manage- 
ment of  our  banks  as  hitherto  conducted,  which,  I  main- 
tain, have  on  the  whole  achieved  great  results  in  the  in- 
terest of  the  nation,  notwithstanding  some  occasional 
faults  and  errors.  Moreover,  some  of  his  suggestions,  in 
my  opinion,  are  in  a  large  measure  impracticable. 


387 


National    Monetary     Commission 

This  is  true  in  the  first  place  of  the  suggestion  that  inas- 
much as  there  exists  no  suitable  representation  of  the  in- 
terests of  purchasers  of  securities,  the  protective  com- 
mittees representing  foreign  bondholders  whose  interests 
are  endangered  should  interfere  in  a  preventive  capacity 
(op.  cit.,  p.  310  et  seq.)  by  carefully  advising  their  con- 
stituents before  the  purchase  of  newly  issued  securities. 
This  suggestion  was  thoroughly  punctured  by  Kaemmerer, 
who  points  out  that  such  an  organization — the  lack  of 
which  the  author  deplores — does  already  exist  in  the  shape 
of  our  banks.  For  it  can  not  be  said  that  the  banks  advise 
their  customers  against  their  own  better  knowledge  in 
questions  of  purchase  of  securities,  underwritten  by  them 
or  by  other  banks,  or  that,  as  a  rule,  they  are  not  far  more 
expert  in  this  field  than  the  members  of  any  protective 
committees.380  Moreover,  according  to  our  legal  provi- 
sions, the  very  purpose  of  the  prospectuses  is  to  exhibit 
the  main  points  underlying  the  intrinsic  value  of  the 
securities.  As  a  rule  this  is  done,  but  the  trouble  is  that, 
as  a  rule,  nobody  reads  them.  The  people  who  are  specu- 
lating on  a  rise  of  securities  neither  read  prospectuses  nor 
do  they  listen  to  the  counsel  or  warnings  of  third  parties, 
let  alone  protective  organizations. 

A  like  criticism  applies  to  the  proposition  (op.  cit.,  p. 
305)  that  the  underwriters,  in  order  to  become  perma- 
nently interested  in  state  and  communal  issues,  should 
be  legally  required  to  retain  permanently  some  part, 
even  though  but  a  small  part,  of  the  issue  (one-half  to 
2  per  cent  according  to  a  graduated  scale)  and  to  de- 
posit it,  say,  at  the  Reichsbank.  The  author  may  rest 


388 


The     German     Great    Banks 

assured  that  not  only  bankers  will  "shake  their  heads" 
at  such  a  proposition  (op.  cit.,  p.  30).  It  reminds  one 
of  the  other  proposition  that  the  banks  should  redeposit 
at  the  Reichsbank  part  of  the  deposits  entrusted  to  them 
by  their  customers.  If  this  keeps  on  we  may  arrive  at 
an  ideal  state  in  which  all  the  capital  or  the  greater 
part  of  it  is  redeposited  and  thus  made  safe.  It  is  true 
that  this  will  insure  the  fullest  degree  of  liquidity,  se- 
curity, and  proper  management,  but  the  only  trouble 
will  be  that  one  will  no  longer  be  able  to  do  any  busi- 
ness. Do  the  critics  really  believe  that  it  suffices  to 
turn  the  knob  of  legislation  or  to  draw  up  a  few  govern- 
mental regulations  in  order  to  attain  the  proper  manage- 
ment of  our  banks — in  regard  to  which,  for  that  matter, 
the  critics  are  by  no  means  agreed?  Vestigia  terrent,  in 
no  other  field,  as  was  repeatedly  shown,  have  state  con- 
trol and  legal  interference  proved  such  dismal  failures, 
as  in  that  of  banking.  Though  I  am  anything  but  an 
advocate  of  laissez-faire  principles,  I  have  too  exalted  a 
conception  of  the  State  and  its  attributes  to  wish  to  see 
it  exposed  to  further  chances  of  tests  of  this  kind,  which 
as  a  rule  can  only  result  in  humiliation. 

Notwithstanding  this  criticism  of  the  individual  pro- 
posals of  the  author,  it  gives  me  pleasure  to  acknowledge 
that  fundamentally,  i.  e.,  so  far  as  the  prerequisites  and 
aims  of  the  issues  of  foreign  loans  are  concerned  there 
seems  to  be  no  difference  of  views  between  us.  I  may 
say  that  these  fundamental  principles  were  formulated 
by  me  in  the  main  as  early  as  1906  in  the  second  edition 


National    Monetary     Commission 

of  this  work,  prior  to  the  appearance  of  Waltershausens' 
book. 

My  aim  in  the  above  discussion  was  merely  to  prove 
that  in  this  department  of  banking,  as  well  as  in  others, 
the  lessons  and  experience  of  the  past  may  enable  us  to 
draw  correct  conclusions  regarding  the  future  and  to  dis- 
courage outsiders  from  proposing  all  sorts  of  impracti- 
cable reform  measures. 

On  the  other  hand,  granted  that  in  consequence  of 
the  issue  of  " exotic"  securities,  German  investors  suf- 
fered considerable  losses  during  the  eighties,  especially 
from  1886  to  i889381  it  seems  to  me  rather  immaterial 
whether  the  data  regarding  the  amount  of  these  losses 
are  exact  or  perhaps,  for  various  reasons,  inexact.  As 
Ad.  Weber  has  pointed  out,  hardly  a  single  investor 
bought  at  the  highest  price  and  sold  at  the  lowest  price; 
furthermore,  the  calculation  disregards  the  large  number 
of  those  who  bought  these  securities  for  speculative 
purposes  only  and  who  disposed  of  them  after  the  con- 
siderable rise  in  the  market  (of  10  per  cent  and  more) 
which  in  many  cases  followed  immediately  after  their 
issue.  It  may  also  be  pointed  out  that  the  table  of  the 
Deutscher  Oekonomist,  reproduced  by  Ad.  Weber  (op. 
cit.,  p.  133)  contains  securities  which  had  not  been  under 
a  cloud  (notleidend)  even  for  a  single  day,  such  as  the 
Lisbon  municipal  loan.  In  the  same  manner  I  do  not 
ascribe  any  decisive  importance  to  the  unquestionable 
fact  noted  by  Schmoller  in  the  well-known  introduction 
to  the  Proceedings  of  the  Bourse  Inquiry  Commission 
(p/XXV)  that  against  the  losses  should  be  placed  the 


39° 


The     German     Great    Banks 

gains  of  about  a  billion  marks  which  had  accrued  to  Ger- 
many from  investments  in  American  and  Russian  secu- 
rities alone,  made  during  the  period  from  1860  to  i892.382 

However,  with  a  view  both  to  the  past  and  to  the  fu- 
ture, it  is  necessary  to  note  that  the  time  at  which  those 
issues  took  place  was  characterized  by  an  abundance  of 
money,  caused  by  a  preceding  period  of  economic  de- 
pression which  lowered  the  value  of  money  and  the  rate 
of  discount.  This  was  also  the  period  of  railway  nation- 
alization and  of  actual  or  threatened  conversions.383  The 
combined  effect  of  these  factors  was  to  start  an  impetu- 
ous desire  on  the  part  of  the  investment-seeking  public 
for  securities  yielding  a  higher  rate  of  interest. 

In  this  connection  it  is  interesting  to  recall  the  fact 
recorded  in  Gilbart's  book  above  cited,384  that  in  England, 
also  mainly  as  a  result  of  a  plethora  of  available  capital 
and  the  resulting  low  interest  rate,  as  early  as  the  years 
1822  to  1825,  inclusive,  there  were  issued  foreign,  mainly 
"exotic,"  loans,  totalling  £25,994,511,  i.  e.,  over  half  a 
billion  marks  within  four  years,385  which  later  on  gave 
occasion  for  many  a  sad  experience.  It  is  true  that 
among  these  loans  there  is  found  a  5  per  cent  Prussian 
loan  of  £3,500,000  issued  in  1822,  a  3  per  cent  Danish 
loan  of  1825  to  the  amount  of  £5,500,000,  and  a  5  per 
cent  Russian  loan  of  1822  amounting  to  £3,500,000,  but 
the  rest,  i.  e.,  the  greater  part,  were  essentially  "exotic 
values,"  viz,  5  per  cent  loans  of  Australia,  Brazil  (2), 
Greece  (2),  Mexico,  Portugal,  and  Spain  (2),  and  6  per 
cent  loans  of  Buenos- Aires,  Chile,  Colombia  (i),  Guate- 
mala, Mexico,  Peru  (2),  etc.  There  had  also  been  in 


391 


National    Monetary     Commission 

England  a  considerable  reduction  of  the  interest  rate  on 
a  large  proportion  of  British  consols,  which  doubtless  had 
long  been  foreseen,  viz,  in  1823  the  conversion  of  £135,- 
000,000  of  5  per  cent  into  4  per  cent  consols,  and  in  1825 
the  conversion  of  £80,000,000  of  4  per  cent  into  3%  per 
cent  consols. 

(ft)  Amount  of  foreign  securities  issued  in  Germany. 

The  combined  effective  amounts  of  all  foreign  issues 
(except  issues  of  foreign  shares  of  stock),  viz,  the  issues 
of  foreign  state  and  communal  loans,  railroad  bonds,  etc., 
since  1894,  i.  e.,  for  the  last  fifteen  years,  according  to  the 
Deutscher  Oekonomist,  were  as  follows: 


1804  .  . 

Million 
marks. 
.    338 

1808.  . 

Million 
marks. 
.    8oi 

IQO2  . 

Million 
marks. 

A  A  C 

IQO6 

Million 
marks. 
I4Q 

i8qs  .  . 

.   ^oo 

1800 

2O^ 

IQCn 

IQQ 

IQO7 

I2O 

1806.  . 

.   480 

I  OCX) 

i8<; 

IQO/t 

186 

IQO8 

2O"\ 

1807  .  . 

.  608 

IQOI  .  . 

.     IQQ 

IQCK  .  . 

.    874 

....     nj$ 

The  combined  value  of  the  foreign  securities  listed  at 
the  German  bourses  from  1897  to  1907  according  to  the 
Statistisches  Jahrbuch  fur  das  Deutsche  Reich  (vol.  29, 
1908,  p.  228),  shows  a  total  of  28,957,700,000  marks,  of 
which  8,224,600,000  marks  represents  the  value  of  con- 
verted securities.  This  leaves  a  net  value  for  newly  listed 
securities  of  20,733,100,000  marks.  The  majority  of  these 
foreign  securities  were  listed  simultaneously  at  foreign 
bourses. 

The  29,000,000,000  marks  or  thereabouts  of  listed 
foreign  securities  show  the  following  distribution: 


392 


The     German     Great    Banks 


[In  thousands  of  marks  face  value.] 


Class  of  securities. 

Total 
amounts. 

Conversions 
(included  in 
total). 

i.  State  loans  

19,  896  300 

6   583   600 

a.  Provincial  and  municipal  loans  
3.  Mortgage  bonds  of  Landschaften   (cooperative  land, 
credit  associations)  and  kindred  institutions. 

699,900 
754   500 

54,ooo 

4.  Mortgage  bonds  of  real  estate  credit  banks  
5.  Bank  shares  

332,  700 

8,600 
8  600 

6.  Bank  debentures  

7.  Railroad  shares  

2,  680,  3OO 

8.  Railroad  debentures  

9.  Industrial  shares 

10.  Industrial  debentures 

Total  

a  Transformations. 


The  effective  value  of  foreign  state  and  communal  loans 
alone  according  to  the  Deutscher  Oekonomist  was  as  follows : 


1804  •  • 

Million 
marks. 
.     IQS 

1898.  . 

Million 
marks. 
278 

IQO^ 

Million 
marks. 
AOO 

1906 

Million 
marks, 
e  c 

1895  .  .  . 

98 

i8oq  .  . 

.  .  .  .     IO2 

I  QO7 

78 

1896.  . 

.         26A 

IQOO 

171 

IQO4. 

QQ 

1908 

1  60 

1807.  . 

.     231 

IQOI  .  . 

4.2 

IQO^  . 

For  the  period  comprising  the  largest  activity  in  the 
issue  of  foreign  securities,  viz,  the  years  1886-89,  tne 
nominal  value  of  these  issues  shows  the  following  totals: 

Marks. 

1886 516,  400,  ooo 

1887 456,  300,  ooo 

1888 696,  ioo,  ooo 

1889 749,  ioo,  ooo 

It  appears  thus  that  during  these  four  years  the  nominal 
value  of  foreign  issues  offered  to  German  investors  was  in 
excess  of  2,417,000,000  marks,386  or  45  per  cent  of  the  nom- 
inal value  of  5,431,000,000  marks  of  issues  of  all  kinds. 
The  many  serious  objections  to  these  figures  are  found 


393 


National     M on  et ar y     Commission 

stated  in  a  previous  chapter  (see  above  pp.  363).  It  may 
suffice  to  mention  here  that  as  a  matter  of  fact  a  con- 
siderable part  of  these  issues  was  not  placed  in  Germany 
and  therefore  not  paid  by  the  German  public. 

If  the  above-given  figures  of  the  Deutscher  Oekonomist 
(see  pp.  360  to  362)  are  used,  which  comprise  all  classes 
of  foreign  issues  including  foreign  shares  (the  amount  of 
which  does  not  figure  in  the  above  table) ,  we  obtain  for 
the  period  1900-1908  the  following  totals: 

Effective  amounts. 


r.ooo  marks. 
275, 270 

I9OI 2  IO,  830 

1902 453,500 

1903 241,670 

1904 232,  no 


1,000  marks, 

1905 1,108,490 

1906 22O,  650 

1907 152,  66O 

1908 228, O2O 


1900.  .  . 

ooo  marks. 
777    I  IO 

1901  

IQO2.  . 

,  623,  140 

i  10  690 

lOO1?    . 

665    8OO 

IQOA.. 

.  OQC;.  070 

The  effective  amounts  of  both  domestic  and  foreign 
securities  issued  during  the  same  period  are  stated  above 
on  pages  360  and  362  by  the  same  authority  as  follows: 


1,000  marks. 
1905 3.  190,680 

1906 2,  741,  480 

1907 2,2II,92O 

1908 3,415,820 


A  comparison  of  these  two  sets  of  figures  proves  that 
the  German  banks,  partly  as  the  result  of  their  experi- 
ence with  a  part  of  the  foreign  loans  issued  during 
the  eighties,  have  become  much  more  careful  in  issuing 
such  loans.  As  a  matter  of  fact  the  amounts  of  foreign 
securities  issued  during  1900—1908,  as  given  in  the  above 
trble,  in  most  cases  are  not  quite  one-half  and  in  some 
cases  even  much  less  than  one-half  the  corresponding 
amounts  for  1886-1890. 


394 


The     German     Great    Banks 

It  also  appears  from  the  table  just  given  that  the 
amount  of  foreign  securities  issued  during  the  year  1907, 
152,660,000  marks,  when  as  a  result  of  the  American 
crisis  there  was  a  great  money  scarcity  in  Germany  as  well, 
fell  much  below  the  like  amount  in  1906,  220,650,000 
marks,  while  the  amount  for  1908  represents  but  one-fifth 
of  the  corresponding  amount  for  1905. 

During  the  high-tide  period  of  the  issue  of  foreign 
securities  (1886-1889),  as  stated  before,  the  proportion  of 
these  issues  to  the  total  issues  effected  in  the  country  was 
no  less  than  45  per  cent.  In  1905  the  proportion  was 
only  a  little  above  one-third,  in  1906  a  little  less  than 
one- tenth,  and  in  1907  only  about  one-fifteenth  of  all 
issues  effected  in  Germany  during  the  same  years. 

The  above  figures  prove  likewise  that  during  the  very 
years  which  we  found  to  have  been  characterized  by  a 
particularly  gratifying  increase  in  the  productive  and 
purchasing  powers  of  the  nation,  the  "export  of  capital" 
from  Germany  has  considerably  abated,  and  that  during 
these  years  the  banks  have  been  acting  in  accordance 
with  the  principle  laid  down  above  (p.  384,  No.  i)  for  the 
regulation  of  foreign  issues  in  general.  In  so  doing  they 
were  partly  influenced,  to  be  sure,  by  the  high  rate  of 
discount,  "obeying  necessity,  not  their  own  impulse." 

(e)  AMOUNTS  OF  LISTED  SECURITIES  ISSUED  BY  EACH  OF 
THE  GREAT  BERUN  BANKS. 

Appendix  V  at  the  end  of  the  volume  contains  exact 
information  regarding  all  securities  issued  by  each  of  the 
six  great  Berlin  banks  and  admitted  to  the  privilege 


395 


National    Monetary     Commission 

of  being  traded  in  and  quoted  at  the  Berlin  bourse  during 
the  years  1883  to  1908. 

Appendix  VI  gives  similar  information  for  the  securities 
emitted  by  the  six  great  Berlin  banks  and  admitted  to 
like  privileges  at  all  German  bourses  during  the  years  1897 
to  1908.  For  earlier  years  than  1897  official  data  were 
available  for  the  Berlin  bourse  only. 

(/)  THE  SYNDICATE  BUSINESS  (Konsortialgeschdft) . 

As  stated  above  (p.  349)  the  two  essential  requirements 
of  any  sound  banking  policy  are  the  liquidity  of  the 
resources  and  the  distribution  of  risks  with  regard  to 
persons,  funds  involved,  time  and  place,  even  in  the  case 
of  the  most  promising  undertakings  and  the  most  bril- 
liant market  condition,  when  there  is  every  prospect 
for  a  speedy  and  smooth  transaction  of  the  business, 
As  a  necessary  consequence  of  these  two  requirements, 
when  a  bank  contemplates  the  underwriting  of  a  business 
of  some  magnitude,  it  tries  to  strengthen  itself  by  alli- 
ances, because  there  is  always  the  possibility  of  a  change 
in  the  political  and  economic  weather  conditions,  and  in 
the  prospects  and  constellations  bearing  on  each  particular 
transaction. 

Accordingly  we  noted  that  in  1859  the  German  credit 
banks,  probably  for  the  first  time,  formed  two  bank 
syndicates.  The  first  was  organized  by  the  Darmstadter 
Bank  for  the  liquidation  of  several  engagements,  which  fell 
due  in  1860,  especially  of  the  Rhine-Nahe  bonds.  The 
1860  report  of  the  bank  makes  special  mention  of  this 
agreement  in  the  following  terms:  "  This  form  has  decided 
advantages,  since  it  diminishes  the  risk  of  the  individual 

396 


The     German     G  r  e  'a  t    Banks 

participants  and  facilitates  the  accomplishment  of  the 
common  task. ' '  The  second  syndicate  was  formed  by  the 
Disconto-Gesellschaft  for  the  purpose  of  underwriting  a 
part  of  the  loan  of  30,000,000  thalers  required  for  the 
mobilization  of  the  Prussian  Army  and  gave  the  first 
impetus  for  the  subsequent  formation  of  the  so-called 
Prussian  syndicate  (Preussen-Konsortium) . 

The  members  of  such  syndicates,  as  a  matter  of  course, 
are  under  obligation  to  fix  or  bind  their  quota  for  the  / 
common  use  of  the  syndicate  during  the  term  of  the  I 
syndicate  agreement,  which  is  fixed,  but  may  be  extended 
by  unanimous  resolution.  The  execution  of  the  common 
operation  is  intrusted,  as  a  rule,  to  a  syndicate  manager 
or  managers,  whose  action  is  subject  to  the  approval  of 
the  executive  board  of  the  syndicate,  or,  if  the  latter  be 
small,  of  the  other  syndicate  members,  as  regards  all 
measures  of  importance  or  such  as  exceed  the  normal 
course  of  the  syndicate  business.  In  most  cases  the 
maximum  amount  of  underwriting  that  may  become 
necessary  is  fixed  beforehand.  This  maximum  may, 
however,  be  exceeded,  as  a  rule,  by  majority  vote  or  by 
assent  of  the  executive  board  in  case  the  management  of 
the  syndicate  deems  it  necessary  or  profitable. 

The  frequent  allotting  of  subsidiary  or  secondary  par- 
ticipations (Unterbeteiligungen)  by  the  individual  mem-^ 
bers  of  the  syndicates  may  be  caused  by  considerations 
of  greater  liquidity  and  of  better  distribution  of  risk.  But 
quite  often  such  action  may  be  due  to  mere  business  con- 
siderations, when  it  is  desired  by  such  courtesies  to  acquire 
a  claim  to  reciprocal  treatment  on  the  part  of  the  favored 
domestic  or  foreign  houses,  or  else  to  reciprocate  a  similar 


397 


National    Monetary     Commission 

courtesy  already  received.  Very  frequently  this  action  is 
a  means  of  conferring  a  favor  on  customers  regarded  as 
specially  valuable,  or  of  indemnifying  certain  customers 
for  participations  which  had  yielded  poor  profit  or  been 
terminated  with  a  loss.  Such  "  subparticipants  "  (Unter- 
\beteiligte)  acquire  no  rights  against  the  syndicate,  but  only 
against  the  member  of  the  syndicate  by  whom  the  sub- 
sidiary allotment  is  made.  The  latter  is  under  obligation 
of  keeping  them  informed  and  accounting  to  them  and  to 
fulfill  toward  his  subsidiaries  everything  "  required  by  com- 
mon honesty  with  regard  to  commercial  etiquette"  (par. 
157  of  the  Civil  Code)  and  conversely  to  abstain  from 
doing  anything  that  might  conflict  with  this  principle. 

An  important  class  of  syndicates  are  the  so-called 
guarantee  syndicates  (Garantiekonsortieri)  which  are 
formed  by  several  banks  in  the  interest  of  industrial  or 
commercial  undertakings,  in  order  to  assure  the  success 
of  an  increase  of  capital.  In  such  cases  the  legal  priority 
right  of  the  old  stockholders  may  be  excluded — the  syndi- 
cate offering  them  the  new  shares  at  the  price  they  were 
taken  over  by  the  syndicate  (zum  Uebernahmepreis)  plus 
a  certain  surcharge.  If  the  legal  priority  right  remains, 
the  guarantee  syndicate  agrees  to  take  over  those  shares 
which  are  not  accepted  by  the  old  shareholders.  In  many 
cases  the  acceptance  of  syndicate  participations  is  by  no 
means  voluntary.  Whenever  there  are  permanent  groups 
(e.  g.  for  Asiatic,  Russian,  Austro-Hungarian  business  or 
for  business  in  the  domain  of  the  electrical  industry) ,  any 
bank  belonging  to  the  group  is  bound  to  accept  its  par- 
ticipation quota  in  the  underwriting  or  issue  unless  there 


398 


The     German     Great    Banks 

is  a  special  arrangement — which  is  rarely  the  case- 
whereby  it  is  free  to  abstain  from  a  particular  operation 
of  the  group.  The  obligation  remains  even  when  a  bank 
objects  to  the  particular  operation  as  a  whole  or  to  any  of 
its  features,  to  the  time,  or,  what  is*  not  less  important, 
the  price,  or  to  any  other  terms  of  the  issue. 

Since  the  formation  of  syndicates  and  the  ceding  of 
subsidiary  participations  may  be  a  feature  of  every  under- 
writing and  issue  transaction  and  is  of  daily  occurrence  in 
connection  with  an  immense  number  of  finance  operations 
of  this  sort,  it  would  serve  no  useful  purpose — even  were 
it  practicable — to  attempt  to  state  the  number  and 
amounts  of  syndicate  operations  and  participations  during 
the  first  and  second  periods.  Such  an  attempt  would  be 
futile  for  several  reasons: 

In  the  first  place  until  recently  such  syndicate  partici- 
pations of  the  banks  were  often  lumped  in  the  bank  reports 
with  "  securities  owned,  "  which  was  decidedly  wrong  from 
the  accounting  point  of  view.  Only  in  the  summary 
reports  (Rohbilanzeri)  of  the  great  Berlin  banks,  published 
since  the  end  of  February,  1909,  has  this  practice  been 
discontinued.  On  the  other  hand,  certain  amounts,  prop- 
erly coming  under  the  head  of  " syndicates"  were  often 
booked  with  "securities,"  and  vice  versa.  The  true  prin- 
ciple would  be  to  book  under  the  head  of  "  syndicates  "  all 
those  participations  which  call  for  additional  installment 
payments  or  which  are  not  at  the  disposal  of  the  bank, 
while  securities  allotted  to  the  bank  as  a  result  of  a  syndi- 
cate participation  either  without  the  above  restrictions,  or 
when  these  restrictions  no  longer  apply,  should  go  under 
the  head  of  "securities."  Finally,  in  many  cases,  the 


399 


National    Monetary     Commission 


items  "syndicates"  and  "securities"  are  either  not  speci- 
fied at  all  or  only  insufficiently  specified  in  the  balance 
sheets.  The  mere  enumeration  of  the  syndicate  partici- 
pations loses  all  interest  and  value,  unless  combined  with 
information  showing  the  distribution  of  risks  with  regard 
to  persons,  funds  involved,  time  and  place,  which  is, 
however,  impracticable  from  the  business  point  of  view. 

Neither  is  it  practicable,  as  will  be  shown  more  fully  in 
section  8,  to  carry  out  the  suggestion  of  giving  a  state- 
ment of  the  installments  remaining  due  and  unpaid  at  the 
end  of  the  year  on  account  of  syndicate  participations, 
since,  for  obvious  reasons,  the  amounts  of  these  obliga- 
tions may  not  be  known  to  the  syndicate  management 
itself  and  at  all  events  could,  in  most  cases,  not  be  ascer- 
tained on  the  3ist  of  December. 

For  these  reasons  I  am  in  a  position  to  give  only  a  few 
numerical  data;  and  even  these  data  must  be  used  with 
caution  because  of  the  shortcomings  found  until  recently 
in  the  accounting  methods  of  our  banks. 

The  number  and  amounts  of  syndicate  participations 
of  the  Deutsche  Bank  in  State,  communal,  and  railroad 
securities,  as  well  as  in  "  shares  and  bonds  of  various 
companies,"  during  the  crisis  year  1900,  and  the  years 
immediately  preceding,  i.  e.,  during  the  period  1897  to 
1901,  inclusive,  were  as  follows:387 


Year. 

Number  of 
participa- 
tions. 

Amounts 
in  thou- 
sands of 
marks. 

1897  

107 

30,  220 

1898 

33   920 

1899  

146 

29,  810 

32   080 

1901  .    .        

179 

33.  870 

400 


The     German     Great    Banks 


The  syndicate  account  of  the  Dresdner  Bank  for  the 
years  1896-1900  was  composed  as  follows:388 

[Amounts  in  million  marks.] 


1896. 

1897. 

1898. 

1899. 

1900. 

Number. 

Amount. 

Number. 

| 

< 

Number. 

Amount. 

Number. 

8 
< 

Number. 

Amount. 

i.  State  securities,  land 

mortgage  bonds,   and 

preference  bonds  (Pri- 

oritaten)  

12 

8-7 

14 

6.9 

9 

4-9 

9 

6-9 

6 

1-3 

2.  Shares  and  bonds  of 

railways     and     other 

transportation    enter- 

prises   
3    Bank  shares 

10 

10 

3-8 
4.98 

5 
9 

•  9 
4-5 

10 

8 

4-  9 
3-8 

13 

7 

6.  2 

3-i 

I  2 

7 

4.8 
5-3 

4.  Securities    issued    by 

real-estate   companies 

(Terraingesellschaf  ten  )  . 

5 

2.  19 

5 

i.  4 

6 

2.  I 

7 

2-3 

5 

2.  4 

5.  Industrial  and  insur- 

ance companies;  over- 

sea enterprises  
Total  

23 

8.18 

24 

10.  9 

35 

l6.3 

50 

20.  8 

46 

2.  4 

60 

27^85 

57 

24.6 

68 

32.0 

86 

39^3 

76 

16.  2 

According  to  the  summary  reports  of  seven  great  Ber- 
lin banks  as  per  June  30,  1909,  the  syndicate  participa- 
tions of  these  banks 389  on  that  day  showed  the  following  L — - 
figures,    as   compared  with  corresponding  figures   under 
date  of  December  31,  1908. 

[Amounts  in  thousands  of  marks.] 


June  30, 
1909. 

Dec.    31. 
1908. 

Deutsche  Bank  
Disconto-Gesellschaft  

23,  ooo 
48,  500 

36,840 
64,  430 

Dresdner  Bank         .  .                                                 ... 

Darmstadter  Bank  

44.900 

46,  840 

Nationalbank  fur  Deutschland  
Commerz-  und  Disconto-Bank  

31.800 
13  ,  900 

33.290 

1  2     I3O 

Syndicate     participa- 
tions. 


90311   —II 27 


401 


National    Monetary     Commission 

(g)  THE  SECURITY  BUSINESS. 

The  security  transactions  of  the  banks  may  be  said  to 
be  partly  voluntary,  partly  involuntary  in  character. 
\  The  voluntary  transactions  of  this  class  include  the 
investment  of  the  liquid  bank  resources  in  correspond- 
ingly liquid  investment  securities — i.  e.,  such  as  can  be 
speedily  realized  and,  secondly,  speculative  security  trans- 
actions. The  latter  may  assume  the  form  of  the  per- 
fectly legitimate  though  largely  speculative  report  and 
arbitrage  transactions,  or  that  of  regular  bourse  specu- 
lation, or  finally  that  of  acquiring  securities  for  the  pur- 
pose of  obtaining  a  temporary  or  permanent  influence  on 
industrial  undertakings. 

The  involuntary  security  transactions  of  the  banks 
comprise  (i)  the  holdings  of  such  securities  as  the  bank  is 
unable  to  dispose  of,  including  securities  either  issued  by 
the  bank  itself  or  turned  over  to  it  as  its  share  of  syndi- 
cate participations,  (2)  the  purchase  of  securities  immedi- 
x.  ately  after  their  issue,  for  the  purpose  of  preventing  an 
undue  depression  of  their  market  value. 

Generally  speaking,  considerable  security  holdings  are 
not  regarded  as  a  favorable  sign,  although  during  critical 
periods  large  holdings  of  this  class  may  represent  an 
increased  proportion  of  particularly  liquid  assets,  or  a 
special  reserve  for  deposits.  Thus,  for  instance,  the 
Deutsche  Bank  in  its  1908  report  mentions  holdings  of 
32,000,000  marks  in  treasury  bills  and  defends  this  course 
as  proper  and  correct.  As  a  rule,  however,  excessive 
holdings  of  securities  will  be  interpreted  to  mean  either 
that  the  times  have  not  been  propitious  for  the  issue 
business  of  the  bank,  or  that  it  maintains  excessive 

402 


The     German     Great    Banks 

speculative  engagements,  or  that  it  is  involved  to  an 
excessive  extent  in  speculative  transactions  on  its  own 
account — a  line  of  business  which  can  be  regarded  as  per- 
missible only  to  a  very  limited  extent — or,  finally,  that  it 
has  been  unable  to  find  sufficiently  profitable  employment 
for  its  funds.  It  is  for  these  reasons  that  a  large  propor- 
tion of  the  writing  off  done  by  the  banks  occurs  under 
the  head  of  securities'  account. 

In  accordance  with  sound  banking  policy  the  investment 
securities  include  also  foreign  securities,  payable  in  gold 
and  dealt  in  at  several  bourses,  which  are  therefore  of  an 
international  character.  During  critical  or  warlike  pe- 
riods such  securities  form  a  valuable  reserve  and  increase 
the  banks'  capacity  for  intervention  and  action.  But,  as 
stated  above,  a  large  portion  of  these  holdings  may  be  com- 
posed of  shares  of  stock,  through  the  possession  of  which 
the  bank  intends  to  exercise  temporary  or  permanent  in- 
fluence upon  an  undertaking  either  by  shaping  the  decis- 
ions of  a  given  general  meeting  of  stockholders,  or  by 
"controlling"  it  outright,  or  by  obtaining  representation 
on  its  supervisory  board. 

Of  all  the  German  banks  the  Darmstadter  Bank  is  prob- 
ably the  one  that  since  its  foundation  and  up  to  the  present 
time  has  published  more  detailed  statements  regarding  the 
composition  of  its  security  holdings390  than  any  other 
bank. 

The  Darmstadter  Bank  gives  the  following  groups:  (i) 
German  public  securities,  real  estate  mortgage  bonds,  and 
railway  debentures;  (2)  foreign  state  and  communal 
bonds,  first  mortgage  bonds  of  foreign  railways,  and  bonds 
of  German  industrial  undertakings;  (3)  stock  shares  of 


403 


National    Monetary     Commission 

German  and  non-German  industrial  and  mining  concerns; 
(4)  bank  shares;  (5)  sundry  holdings. 

The  Deutsche  Bank  groups  its  security  holdings  under  the 
following  four  heads:  (i)  State  and  communal  bonds, 
mortgage  bonds  and  railway  bonds ;  (2)  shares  of  railroads, 
banks,  and  industrial  concerns;  (3)  bonds  of  industrial 
concerns;  (4)  sundry  holdings. 

The  Dresdner  Bank  distinguishes  among  its  security 
holdings  only  three  groups,  viz:  (i)  State  bonds,  mortgage 
bonds,  railway  and  industrial  bonds;  (2)  shares  of  banks, 
railroads,  other  transportation  companies,  and  insurance 
concerns;  (3)  shares  of  industrial  corporations. 

It  would  therefore  be  of  but  little  value  to  give  figures 
of  securities  held  by  the  various  banks,  since,  as  was  re- 
marked on  page  399,  the  account  " securities  owned"  in 
many  cases  appears  understated,  inasmuch  as  a  certain 
portion  of  the  securities,  properly  belonging  under  that 
head,  is  booked  under  the  head  of  "  syndicate  participa- 
tions." On  the  other  hand,  it  is  equally  true  that  securi- 
ties which  properly  belong  under  the  head  of  "  syndicate 
participations  ' '  are  at  times  found  booked  under  the  head 
of  "securities  owned."  A  similar  shifting  is  frequently 
; noticed  between  the  account  "securities  owned"  and  that 
"permanent  participations  in  other  banking  institut- 
ions and  concerns,"  if  the  two  accounts  are  separated  at 
all.  The  bimonthly  summary  statements,  now  published 
by  a  number  of  banks,  separate  the  two  accounts. 

During  the  period  of  great  activity  preceding  the  crisis 
of  1901  the  account  "securities  owned"  showed  a  large 
increase  over  that  shown  for  the  previous  years.  Thus 
the  Dresdner  Bank  showed  the  following  changes 


404 


The     German     Great    Banks 


(in  millions   of   marks)    under  that  head  for  the  years 
1896-1900: 


1896 

1897. 

1898. 

1899. 

1900. 

Group  I  

9-  9 

9-8 

15 

12.8 

16.  i 

2  7 

4.  9 

2.  9 

6.  i 

6.  5 

Group  III              

5-  8 

8.7 

8.2 

19 

10.  7 

This  table  shows  a  considerable  increase  largely  in  the 
amount  of  industrial  shares  held. 

In  the  case  of  the  Darmstadter  Bank  the  like  account 
for  the  period  1896-1902,  classed  by  its  five  groups, 
shows  the  following  changes  (in  millions  of  marks)  :391 


1896. 

1897- 

1898 

1899 

1900 

1901. 

1902. 

Group  I  
Group  II  

1.8 
1  .  4 

i-3 
.  9 

I.  I 
4.8 

5-9 
3-  2 

I.  2 

3-  i 

4 
2.  3 

4.4 
3  •  3 

Group  III 

5  i 

3  9 

3-  3 

5-  4 

5-  4 

4  8 

9  4 

Group  IV  
Group  V  

2.6 

i 

1-9 

i 

1-9 

.  7 

1.7 

i 

1-7 
.  9 

1.6 
.  7 

2-9 

.8 

The  summary  balance  sheets  (Rohbilanzeri)  of  the 
undermentioned  banks  published  under  date  of  June  30, 
1909,  show  the  following  figures  (in  millions  of  marks)  for 
the  account  "securities  owned, " though  without  detailed 
grouping,  as  compared  with  the  figures  for  the  end  of  the 
preceding  year.392 


Situation  on 
June  30.  1909. 

Situation  on 
Dec.  31,  1908 

Deutsche  Bank  
Disconto-Gesellschaft  
Dresdner  Bank  . 

Si-3 
23.8 

55.68 
29.  49 

Darmstadter  Bank  
A.  Schaaffhausen'scher  Bankverein  
Nationalbank  fur  Deutschland 

5I-S 
43-0 
26  <; 

47-  77 
42-33 

Commerz-und  Disconto-Bank  

31-8 

33-39 

405 


National    Monetary     Commission 

In  closing  this  chapter  the  following  points  regarding 
the  investment  and  issue  activities  of  the  banks  must  be 
emphasized : 

The  successful  accomplishment  of  the  important  and 
various  tasks  devolving  upon  the  banks,  becomes  possible 
only  when  there  is  a  strong  bourse — i.  e.,  an  organization  of 
the  utmost  strength  and  elasticity  during  normal  times 
and  of  the  utmost  power  of  resistance  during  critical  and 
bad  times.  It  is  only  through  the  concentration  of  the 
converging  streams  of  offers,  demands,  and  news  that 
resultant  prices  will  present  a  fairly  accurate  picture  of 
underlying  conditions.  But  this  function  of  balancing 
offer  and  demand  can  be  performed  by  the  bourse  in  a 
satisfactory  manner  only  in  case  there  can  be  enlisted  for 
permanent  as  well  as  temporary  service  sufficient  amounts 
of  capital  to  be  used  in  transactions,  which,  like  trading 
in  futures,  prevent  as  much  as  practicable  violent  and 
sudden  variations  in  the  quotations  of  securities  and  are 
apt  to  give  timely  warning  of  impending  disturbances  of 
the  financial  equilibrium.  As  Schmoller  puts  it  in  his 
Gsundriss,  Volume  II,  page  37,  in  the  security  market  the 
option  business  represents  "  a  more  refined  technique  of  the 
modern  business  for  future  delivery;"  it  is  "  an  instrument 
of  increasingly  correct  calculation  of  future  probabilities, 
a  means  of  controlling  the  most  important  elements  of 
price  formation"  and  a  form  of  business,  "which  may  be 
improved,  regulated,  and  placed  on  a  higher  moral  level 
but  can  not  be  dispensed  with."  The  same  author  very 
properly  says,  on  page  493  of  the  same  work:  "Every 
improvement  in  the  organization  of  the  market  has  in  view 
a  more  correct  price  formation,  while  any  lessening  of 


406 


The     German     Great    Banks 

extreme  price  variations  results  in  the  lessening  of  the 
damages  caused  by  crises." 

It  is  often  said  that  the  strength  of  a  bourse  lies  in  the 
fact,  that  in  times  of  general  business  prosperity  it  will 
register  invariably  a  strong  upward  movement  of  values 
notwithstanding  all  obstacles  caused  by  fiscal  and  bourse 
legislation.  But  such  a  view  is  due  to  imperfect  knowl- 
edge and  excusable  only  on  that  ground.  Economic  laws 
are  superior  to  governmental  laws.  No  bourse  or  fiscal 
law  can  prevent  altogether  the  upward  movement  of  busi- 
ness, nor  a  corresponding  advance  of  values — which  is 
merely  emphasized  by  speculation — of  concerns  sharing 
in  that  advance. 

This  error  is  the  more  regrettable,  because  the  need 
of  a  strong  bourse  is  felt  more  and  more  in  view  of  the . 
impending  grave  competitive  struggle.  Now,  the  strength 
of  a  bourse  is  shown  precisely  in  the  fact,  ' '  that  during 
prosperous  periods  it  is  successful  in  preventing  impet- 
uous and  excessive  advances  of  values,  during  bad  times — 
in  averting  excessively  rapid  and  sudden  declines  in  val- 
ues, and  during  a  crisis — in  preventing  the  unreasonable 
discouragement  of  the  public  and  thus  an  undue  depre- 
ciation of  values. ' '  (Memorial  of  the  Zentralverband 
December,  1903,  p.  35.)  It  is  only  necessary  to  recall  the 
disastrous  9th  of  February,  1904,  the  date  of  the  outbreak 
of  the  Russian- Japanese  war,  in  order  to  get  a  clear  idea 
of  a  strong  bourse — and  its  reverse. 

SECTION  3.— BANK  GROUPS. 

The  subject  of  this  chapter  are  not  those  bank  groups, 
which  are  formed  as  the  result  of  the  permanent  clustering 


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National     Monetary     Commission 

of  a  number  of  so-called  " concern-banks"  (Konzern- 
bankeri)  around  a  leading  bank,  representing  a  permanent 
community  of  interest  and  action  of  the  banks  concerned 
and  embracing  the  entire  field  of  banking  operations. 
These  "grorrpirrg'g'af  e~  tHe  result  of  concentration  tendencies 
and  will  be  discussed  at  length  in  a  subsequent  chapter. 

Nor  will  the  discussion  of  this  section  take  in  the  so- 
called  ' '  syndicates ' '  (Konsortieri)  which,  as  was  pointed 
out  above,  are  formed  with  the  view  of  distributing  the 
risk,  of  preserving  the  liquidity  of  resources  and  in  the  in- 
terest of  smoother  and  more  rapid  performance  of  a  single 
given  financial  operation.  It  has  been  shown  that  when- 
ever the  risk  or  the  engagements  assumed  are  especially 
large,  syndicates  composed  of  a  shifting  number  of  bank- 
ing firms  are  constantly  formed  for  each  given  case  either 
under  the  name  of  a  "guarantee-syndicate"  or  "loan- 
syndicate." 

The  bank  groups,  which  are  to  be  discussed  in  the  pres- 
ent chapter,  are  permanent  combinations,  formed  by 
certain  banks  and  banking  firms  for  certain  operations  or 
classes  of  operations,  and  involving  a  more  or  less  close 
alliance  among  the  individual  banks.  Among  the  reasons 
of  such  formations  the  following  may  be  mentioned: 

i.  In  the  beginning  of  the  first  period  they  were  the 
only  means  of  enabling  the  new  banks  to  share  in  the 
participation  of  domestic  and  foreign  loans  in  compe- 
tition with  the  powerful  private  houses,  especially  the 
Rothschilds,  who  until  that  time  had  an  almost  uncon- 
tested  monopoly  in  that  field.  This  was  the  occasion 
which  gave  rise  to  the  so-called  Preussenkonsortium 


408 


he     German     Great    Banks 


(Prussian  syndicate)  for  the  underwriting  and  issue  of 
the  Prussian  consols,  to  a  somewhat  differently  composed 
group,  formed  during  the  second  period,  to  underwrite 
the  loans  of  the  German  Empire  and  to  the  so-called 
Rothschild  group  for  undertaking  the  issues  and  kindred 
operations  of  the  Austro-Hungarian  Government. 

(a)  The  Prussian  syndicate,  as  already  stated,  owes  its 
origin  to  a  syndicate  of  large  Berlin  banks  and  banking 
houses  formed  in  1859  under  the  leadership  of  the  Dis- 
conto-Gesellschaft  on  the  occasion  of  the  Prussian  army 
mobilization  loan  of  30,000,000  thalers.393  It  took  a  lead- 
ing part  in  the  loan  operations  of  the  sixties  and  seven- 
ties, continuing  its  activity  to  the  most  recent  years  in  \\, 
floating  most  of  the  Prussian  state  loans.  This  arrange- 
ment, however,  was  by  no  means  exclusive,  as  the  Prus- 
sian Government  during  the  eighties,  also  during  most 
recent  years,  in  order  to  prevent  a  monopoly,  repeatedly 
appealed  to  the  market  direct.  On  other  occasions  the 
Government  would  dispose  of  portions  of  its  loans  to 
individual  banks  and  banking  houses,  although  the  per- 
manent effects  of  such  a  policy  on  the  market  were 
rather  unfavorable.  Sometimes  a  member  of  the  group 
would  underwrite  singly  an  entire  imperial  or  Prussian 
loan.  The  latter  mode  was  followed  in  May,  1900,  when 
the  Deutsche  Bank  undertook  the  issue  of  200,000,000 
marks  of  German  imperial  bonds  and  Prussian  consols. 

The  Prussian  syndicate,  as  at  present  (in  1909)  con- 
stituted, is  headed  by  the  Royal  Seehandlung  (Prussian 
main  bank),  and  after  the  elimination  of  defunct  firms 
includes  the  following  banks  and  banking  houses: 


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National    Monetary     Commission 

Bank  syndicate  for  Prussian  state  loans. 
Konigliche    Seehandlung     (Prussian 


main  bank). 

Bank  fur  Handel  und  Industrie. 
Berliner  Handelsgesellschaft. 
S.  Bleichroder. 

Commerz-  und  Disconto-Bank. 
Delbruck,  Leo  &  Co. 
Deutsche  Bank. 

Direction  der  Disconto-Gesellschaft. 
Dresdner  Bank. 
F.  W.  Krause  &  Co. 
Mendelssohn  &  Co. 
Mitteldeutsche  Kreditbank. 
Nationalbank  fur  Deutschland. 
A.  Schaaffhausen'scher  Bankverein. 
Sal.  Oppenheim,  jr.,  &  Co.,  Cologne. 
Lazard    Speyer-Elh'ssen,    Frankfort- 

on-the-Main. 


Jacob  S.  H.  Stern,  Frankfort-on-the- 

Main. 

L.  Behrens  &  Sohne,  Hamburg. 
Norddeutsche  Bank,  Hamburg. 
Vereinsbank,  Hamburg. 
M.  M.  Warburg  &  Co.,  Hamburg. 
Allgemeine   Deutsche   Creditanstalt, 

Leipzig. 

Rheinische  Creditbank,  Mannheim. 
Bayerische  Hypotheken-  und  Wech- 

selbank,  Munich. 
Bayerische  Vereinsbank,  Munich. 
Konigliche  Hauptbank,  Nuremberg. 
Ostbank  fur  Handel  und  Gewerbe, 

Posen. 
Wurttembergische          Vereinsbank, 

Stuttgart. 


(6)  The  bank  group  for  underwriting  the  loans  of  the 
Empire,  as  at  present  constituted,  is  headed  by  the 
Reichsbank,  and  after  the  elimination  of  various  defunct 
firms  includes  the  following  banks  and  banking  houses: 


Syndicate  for 

Reichsbank. 

Konigliche    Seehandlung    (Prussian 

main  bank). 

Bank  fur  Handel  und  Industrie. 
Berliner   Handelsgesellschaft. 
S.  Bleichroder. 

Commerz-  und  Disconto-Bank. 
Delbruck,  Leo  &  Co. 
Deutsche  Bank. 

Direction  der  Disconto-Gesellschaft 
Dresdner  Bank. 
F.  W.  Krause  &  Co, 


imperial  loans. 

Mendelssohn  &  Co.    " 
Mitteldeutsche  Kreditbank. 
Nationalbank  fur  Deutschland. 
A.   Schaaffhausen'scher  Bankverein. 
Sal.  Oppenheim,  jr.,  &  Co.,  Cologne. 
Lazard   Speyer-Ellissen,    Frankfort- 

on-the-Main. 
Jacob  S.  H.  Stern,  Frankfort-on-the- 

Main. 

L.  Behrens  &  Sohne,  Hamburg. 
Norddeutsche  Bank,  Hamburg. 
Vereinsbank,  Hamburg. 


410 


The     German     Great    B 


a  n 


M.  M.  Warburg  &  Co.,  Hamburg. 
Allgemeine  Deutsche  Creditanstalt, 

Leipzig. 

Rheinische   Creditbank,   Mannheim. 
Bayerische  Hypotheken-  und  Wech- 

selbank,  Munich. 


Bayerische  Vereinsbank,  Munich. 
Konigliche  Hauptbank,  Nuremberg. 
Ostbank  fur  Handel  und  Gewerbe, 

Posen. 
Wurttembergische          Vereinsbank, 

Stuttgart. 


(c)  In  Austria  there  has  existed  since  1848  a  close 
relationship  of  the  financial  administration  of  the  Govern- 
ment with  the  Vienna  house  of  Rothschild,  which  until 
1855,  when  the  Osterreichische  Kreditanstalt  was  added, 
conducted  practically  all  the  financial  operations  for  the 
government.  It  was  only  in  1864  that  the  Disconto 
Gesellschaft,  at  the  head  of  a  syndicate  of  German  bank- 
ing houses,  entered  into  competition  with  the  Rothschild 
house  and  the  Kreditanstalt,  and  was  allotted,  out  of  a 
total  silver  loan  of  70,000,000  florins,  the  portion  of 
23,500,000  florins.  It  was  this  successful  competition 
which  brought  about  the  entrance  of  the  Disconto-Gesell- 
schaft  into  the  group  known  subsequently  as  the  Roth- 
schild syndicate.  During  the  following  years  a  number 
of  other  banks  and  banking  houses  joined,  including 
the  Allgemeine  Osterreichische  Bodenkredit-Anstalt  of 
Vienna,  the  Ungarische  Allgemeine  Kreditbank,  and  the 
Bank  fur  Handel  und  Industrie.  The  latter  institution, 
as  early  as  1854,  na(^  joined  the  Rothschild  firm  in  under- 
writing a  loan  for  the  Government  of  Baden,  and  in  1862, 
that  is  to  say,  much  earlier  than  the  Disconto-Gesell- 
schaft,  had  participated  in  an  issue  of  83,000,000  florins  of 
the  Austrian  5  per  cent  1860  lottery  loan  by  the  Roth- 
schild firm  and  the  Kreditanstalt.  Later  on  the  group 
was  joined  by  the  banking  houses  of  S.  Bleichroder,  Sal. 
Oppenheim,  jr.,  of  Cologne,  and  Mendelssohn  &  Co.,  and 


411 


National    Monetary     Commission 

during  the  most  recent  period — for  state  loans — by  the 
Austrian  Postal  Savings  Bank. 

The  Rothschild  syndicate  represents  to-day  a  firm 
organization  for  the  common  management  not  only  of 
Austro-Hungarian  finance  operations  of  a  public  char- 
acter, but  also  of  all  other  finance  operations  which  it 
cares  to  undertake  in  either  of  these  two  countries.  It  is 
composed  at  present  of  the  following  concerns : 

Rothschild  group. 


Direktion  der  Disconto-Gesellschaft. 
Osterreichische     Kreditanstalt     fur 

Handel  und  Gewerbe. 
M.  Wodianer. 

S.  M.  von  Rothschild,  Vienna. 
Ungarische   Allgemeine   Kreditbank 

in  Budapest. 
S.  Bleichroder. 
Bank  fur  Handel  und  Industrie. 


de  Rothschild  freres,  Paris. 

N.  M.  Rothschild  &  Sons,  London. 

Allgemeine    Osterreichische    Boden- 

kredit-Anstalt,  Vienna. 
Sal.  Oppenheim,  jr.,  Cologne. 
Mendelssohn  &  Co. 
Osterreichische    Postsparkasse    (for 

state  loans). 


(2)  The  organization  in  1890  of  a  group  for  Asiatic  busi- 
ness was  the  natural  consequence  of  the  founding,  in  1889, 
v-by  a  number  of  large  banks  and  private  banking  houses, 
of  the  Deutsch-Asiatische  Bank.  A  great  many  difficulties 
had  to  be  overcome  before  this  bank  could  be  founded. 
In  the  first  place  there  was  the  nearly  always  successful 
tactics  of  the  Chinese  negotiators  in  charge  of  the  national 
finance  and  railroad  business  of  playing  off  against  each 
other  the  individual  competitors  in  the  various  countries. 
On  the  other  hand,  for  a  long  time  no  concerted  action 
with  English  banking  circles  nor  even  of  German  banks 
with  each  other  could  be  attained,  the  latter  having 
formed  two  separate  groups  under  the  leadership  of  the 
Disconto-Gesellschaft  and  of  the  Deutsche  Bank  respec- 


412 


The     German     Great    Banks 


lively.  The  organization  of  the  Deutsch-Asiatische  Bank 
and  the  formation  a  year  later  of  the  Syndikat  fur 
Asiatische  Geschafte  (syndicate  for  Asiatic  business)  put 
an  end  to  the  competitive  struggle  between  those  two 
groups.  Inasmuch  as  independent  action  of  other  Ger- 
man banks  had  but  little  chance  in  the  future,  united 
action  of  German  interests  became  assured  not  only  with 
reference  to  Chinese,  but  also  all  Asiatic  financial  opera- 
tions, the  new  powerful  syndicate,  led  by  the  Disconto- 
Gesellschaft,  undertaking  the  common  planning  and  man- 
aging of  loans  and  advances  to  the  central  governments, 
provinces,  and  railroad  companies  in  China,  Japan,  and 
Korea  and  the  organizing  of  railroad  and  mining  com- 
panies in  China.  The  structure  of  this  syndicate  is,  how- 
ever, somewhat  loose,  as  it  is  left  to  each  member  to  keep 
aloof  from  any  individual  transaction.394 

The  successful  activity  of  this  syndicate  was  frustrated 
for  the  time  being  by  the  outbreak  in  the  nineties  of  the 
Chinese- Japanese  war.  In  March,  1896,  the  syndicate  suc- 
ceeded for  the  first  time,  with  the  gratifying  cooperation 
of  the  English  Hongkong  and  Shanghai  Bank,  in  taking 
over  £8,000,000  of  the  total  Chinese  loan  of  £16,000,000. 
An  agreement  was  also  reached  with  the  English  bank  for 
future  common  action  in  Chinese  business  on  the  basis  of 
equal  participation,  resulting,  soon  afterwards,  in  1898,  in 
the  common  taking  over  of  the  remainder  of  the  Chinese 
war  indemnity  to  Japan  in  the  shape  of  a  4^  per  cent 
loan  of  another  £16,000,000. 

Since  then  the  Asiatic  syndicate  has  managed  success- 
fully a  number  of  other  financial  transactions. 


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National    Monetary     Commission 

(3)  The  formation  of  groups  for  the  permanent  common 
handling  of  other  domestic  state  loans — as  for  instance,  the 
underwriting  of  the  Bavarian  and  Baden  loans  and  of  for- 
eign state  and  railroad  loans  (such  as  Swiss,  Argentine, 
Mexican,  Russian,  Roumanian,  Portuguese,  etc.) — occurred 
more  frequently  during  the  second  period.  These  groups, 
however,  if  we  except  the  Russian  group  headed  by 
Mendelssohn  &  Co.,  did  not  attain  the  same  solidity  of 
structure  and  consequent  exclusive  power  as  the  group 
formations  mentioned  in  paragraph  2.  Their  origin  was 
often  due  to  a  combination  into  one  group  of  syndicates, 
originally  opposing  each  other,  or  to  the  subsidiary  banks 
of  a  great  bank  combining  into  a  single-issue  group  for  cer- 
tain underwriting  purposes.  The  same  remarks  apply  to 
group  formations  for  the  taking  over  of  municipal  loans, 
as,  for  instance,  of  Cologne,  Hamburg,  Frankfort-on-the- 
Main,  and  Munich.  In  the  latter  case  the  groups  are 
composed  of  local  houses,  strengthened  in  some  cases  by 
the  joining  of  friendly  outside  banks.  However,  these 
groups  show  frequent  changes  of  membership,  since 
they  were  never  strong  enough  to  completely  shut  out 
competition. 

As  this  chapter  is  devoted  exclusively  to  the  discus- 
sion of  permanent  bank  groups,  no  specific  mention  is 
made  of  those  syndicates  which,  originally  formed  inde- 
pendently of  each  other,  for  the  taking  over  of  state  or 
municipal  loans,  frequently  coalesced  into  one  group  for  a 
single  transaction,  in  order  to  do  away  with  mutual  out- 
bidding. Such  transitory  combines  may  be  characterized 
as  mere  price  conventions. 


414 


The     German     Great    Banks 

On  the  other  hand,  syndicates  originally  formed  as 
societates  unius  rei,  for  instance,  for  the  taking  over  of 
a  municipal  loan,  may  gradually  coalesce  into  solid  and 
permanent  group  formations.  During  the  second  period, 
particularly,  it  became  more  and  more  customary  to  main- 
tain the  combination  after  the  first  successful  cooperation 
in  case  the  character  of  the  transaction  was  such  that  its 
recurrence  at  regular  intervals  might  confidently  be  ex- 
pected. This  was  unfortunately  true  of  municipal  loans, 
the  recurrence  of  which  could  be  predicted  with  almost 
mathematical  certainty.  In  such  cases  each  party  of  the 
syndicate  felt  at  first  only  morally  bound  to  refrain  from 
independent  bidding  or  from  joining  another  syndicate, 
but  to  either  suggest  or  await  an  invitation  to  a  meeting 
of  the  syndicate,  unless  it  had  informed  beforehand  the 
management  of  the  old  syndicate  of  its  contrary  decision. 
The  management  of  such  syndicates,  unless  a  change  was 
expressly  provided  for,  as  a  rule  remained  unchanged  for 
subsequent  transactions. 

(4)  A  large  number  of  bank  groups  originated  during 
the  second  period  as  a  result  of  the  changed  relations  of 
the  banks  to  industry  as  set  forth  in  previous  chapters. 
In  this  field  the  formation  of  groups,  while  due  to 
designed  industrial  policy,  had  become  more  pronounced 
and  definite  since  the  nineties,  and  in  turn  caused  a  more 
refined  differentiation  and  growing  intensification  of  this 
policy.  The  principal  cause  was,  however,  the  enormous 
demand  for  capital  by  industry  in  general,  and  the  electro- 
technical  industries  in  particular.  Accordingly  we  find 
such  bank  groups  closely  allied  with  the  so-called  "  heavy  " 


415 


National     Monetary     Commission 

^industries  (mining,  iron  and  steel)  as  well  as  with  the 
"light"  industries,  especially  the  electrical  industry, 
breweries,  secondary  railways,  and  petroleum  enterprises. 
Until  about  1900  there  had  been  formed,  to  correspond 
with  the  seven  combinations  of  electrical  undertakings 
to  be  discussed  later  on,  seven  bank  groups,  each  back- 
ing the  respective  industrial  combination  and  attending 
to  the  issue  business  of  the  industrial  combination  as 
well  as  to  its  other  financial  operations.  In  particular 
the  Siemens  &  Halske  stock  company  was  backed  in 
1900  by  a  group  of  n  banks  headed  by  the  Deutsche 
Bank;  the  combination  formed  under  the  leadership  of 
the  Allgemeine  Elektrizitatsgesellschaft  (A.  E.  G.)  was 
backed  by  a  bank  group  consisting  of  8  banks  headed  by 
the  Berliner  Handelsgesellschaf t ;  the  combination  known 
as  the  Union-Elektrizitatsgesellschaft  (U.  E.  G.)  was 
backed  by  a  bank  group  headed  by  the  Disconto-Gesell- 
schaft,  etc. 

In  the  same  year  the  so-called  "Loewe-Gruppe"  (i.  e., 
the  group  of  industrial  undertakings  controlled  by  the  firm 
IvUdwig  Loewe  &  Co.)  was  backed  by  the  same  six  banks 
and  banking  houses  which  stood  behind  the  Union-Elec- 
trizitatswerke.  This  banking  syndicate,  formed  at  first 
for  purposes  of  common  underwriting,  subsequently  con- 

/  ducted  also  the  other  financial  operations  of  the  indus- 
trial group.395  It  appears  that  since  the  nineties  the  ever 
increasing  extension  of  the  plant  and  the  annexing  of  a 
number  of  hitherto  independent  concerns  made  it  impos- 
sible to  have  the  largely  increased  demands  for  capital  met 
either  by  the  original  firm  or  by  any  single  banking  institu- 
tion, the  latter  partly  for  the  reason  that  a  number  of  bank- 


416 


The     German     Great    Banks 

ing  institutions  were  simultaneously  interested  in  several 
enterprises  of  the  electro- technical  industry. 

In  the  field  of  secondary  railways  (Kleinbahnen)  sev- 
eral groups  were  formed.  One  of  them  is  headed  by  the 
Berliner  Handelsgesellschaft,  which  founded  the  West- 
deutsche  Eisenbahngesellschaft.  Another  is  headed  by 
the  Darmstadter  Bank,  which  organized  the  Sud- 
deutsche  Eisenbahngesellschaft  at  Darmstadt;  a  third, 
headed  by  the  Nationalbank  fur  Deutschland,  is  backing 
the  Allgemeine  Deutsche  Kleinbahngesellschaft  und  ver- 
einigte  Eisenbahn-  Bau-  und  Betriebsgesellschaft  at  Berlin 
(General  German  Secondary  Railway  and  Consolidated 
Railway  Construction  and  Operation  Company). 

The  object  of  the  first  group  was  to  assist  the  firm  of 
Lenz  &  Co.,  engaged  in  the  construction  and  operation  of 
secondary  railways;  that  of  the  second  group,  to  assist 
the  similar  enterprises  of  the  firm  Herrmann  Bachstein; 
while  the  group  headed  by  the  Dresdner  Bank  has 
founded  trust  companies  for  the  floating  of  German 
and  Austro-Hungarian  railway  securities  (Zentralbank  fur 
Eisenbahnwerte) ,  also  the  firm  Orenstein  &  Koppel  (now 
consolidated  with  the  firm  Arthur  Koppel) ,  engaged  in  the 
construction  of  field  and  secondary  railroads. 

In  the  field  of  the  petroleum  industry  the  two  foremost 
groups  are  those  headed  by  the  Deutsche  Bank  and  by 
the  Disconto-Gesellschaft.  These  organizations  are  the 
expression  of  the  industrial  enterpreneur  activity  of  the 
great  banks,  an  activity  which  during  this  period  has  for 
good  reasons  been  slackening.  The  aim  is  to  counterbal- 
ance the  monopoly  position  in  the  petroleum  market  of 
the  American  and  Russian  producers. 

90311° — ii 28  417 


National    Monetary     Commission 

In  1903  the  Deutsche  Bank  became  interested  on  the  one 
hand  in  the  Roumanian  petroleum  company  Steaua 
Romana  by  taking  over  a  large  portion  of  newly  issued 
stock  and  by  having  one  of  its  directors  made  chairman 
of  the  supervisory  board,  and,  on  the  other,  in  the 
Galician  petroleum  company  "Schodnica.  " 

Subsequently,  on  January  21,  1904,  together  with  the 
Wiener  Bankverein,  the  Darmstadter  Bank,  the  National- 
bank  fur  Deutschland,  the  Mitteldeutsche  Kreditbank,  and 
the  banking  firm  of  Jakob  S.  H.  Stern  in  Frankfort-on- 
the-Main,  it  founded  in  Berlin  the  Deutsche  Petroleum 
Aktiengesellschaft  (with  a  share  capital  of  20,000,000 
marks),  into  which  it  merged  its  participations  in  the 
Roumanian,  Russian,  and  Galician,  also  in  some  Hanover 
petroleum  enterprises.  The  new  company  soon  after 
made  an  agreement  with  the  Petroleum-Produkten- Aktien- 
gesellschaft in  Hamburg  for  the  transportation  of  the 
Roumanian  petroleum. 

About  the  same  time  (1903)  the  Disconto-Gesellschaft, 
together  with  the  firm  of  S.  Bleichroder,  participated  in 
the  petroleum  industry  company  "  Bustenarii ' '  and  in  an- 
other large  Roumanian  petroleum  company,  the  ' '  Telega 
Oil  Company  (Limited) , ' '  which  made  an  agreement  for 
the  transportation  of  the  petroleum  with  the  Shell  Trans- 
port and  Trading  Company,  which  in  turn  owned  shares 
of  a  nominal  amount  of  2,600,000  marks,  out  of  a  total 
nominal  capital  of  3,000,000  marks  in  the  Petroleum- 
Produkten- A  ktiengesellschaft. 

In  1905  the  Roumanian  petroleum  refining  company 
'  *  Vega ' '  and  the  '  *  Society  for  the  Development  of  the 
Roumanian  Petroleum  Industry  Credit  Petrolifer ' '  were 


418 


The     German     Great    Banks 

organized,  the  first  under  the  combined  auspices  of 
the  Disconto-Gesellschaft,  S.  Bleichroder,  and  the  Com- 
pagnie  Industrielle  des  Petroles  at  Paris,  for  the  purpose 
of  refining  crude  petroleum.  In  the  same  year  the  Dis- 
conto-Gesellschaft group  merged  its  Roumanian  petroleum 
participations  in  the  "  Allgemeine  Petroleum-Industrie- 
Aktiengesellschaft"  founded  by  it  with  a  capital  of 
17,000,000  marks. 

A  third  group,  headed  by  the  Dresdner  Bank,  and  com- 
prising the  A.  Schaaffhausen'scher  Bankverein,  the  Inter- 
nationale Bohrgesellschaft,  and  several  industrial  and 
banking  firms,  founded  in  Roumania  a  third  petroleum 
company  under  the  name  of  the  "  Petroleum- Aktiengesell- 
schaft  Regatul  Romana, ' '  with  a  capital  of  24,000,000  lei 
(francs) . 

In  1906  the  European  Petroleum  Union,  with  a  capital 
of  37,000,000  marks,  was  founded  by  Russian  petroleum 
producers,  closely  connected  with  the  crude-oil  produc- 
ing firm  of  Nobel  Brothers  in  St.  Petersburg  and  the 
banking  house  de  Rothschild  Freres  in  Paris,  in  company 
with  the  Deutsche  Bank  and  other  (Russian,  Roumanian, 
and  Galician)  petroleum  interests,  with  the  object  of  con- 
solidating the  various  European  selling  organizations 
controlled  by  them. 

In  all  the  above-described  cases  special  care  was  taken 
to  distribute  the  risk  by  the  formation  of  groups,  to 
mobilize  the  participations  by  the  organization  of  stock 
companies,  with  the  view,  undoubtedly,  of  disposing  of  at 
least  part  of  the  participations  as  the  companies  grew  in 
strength,  and  of  retaining  only  an  amount  required  for  the 
continuance  of  permanent  influence. 


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National    Monetary     Commission 

The  industrial-bank  groups  are  thus  seen  to  differ  from 
other  bank  groups  in  that  they  represent  a  combination  of 
the  industrial  entrepeneur  activity — which  as  matter  of 
principle  it  would  be  better  to  leave  to  industry  itself— 
with  that  of  bank  financing  proper  and  a  special  banking 
I  initiative  (Bankinitiati-ve) .  It  is  the  latter  that  has 
caused  the  unprecedented  growth  in  Germany  of  some 
new  industries,  such  as  the  electro-technical,  or  the  crea- 
tion of  hitherto  nonexisting  industries,  such  as  the 
petroleum  industry. 

SECTION  4.— THE  OVER-SEA  AND  FOREIGN  BUSINESS 
OF  THE  GERMAN  CREDIT  BANKS.396 

I.  THE  PART  TAKEN  BY   THE   BANKS   IN  DEVELOPING 
GERMAN  OVER-SEA  IMPORT  AND  EXPORT  TRADE. 

As  stated  before,  a  special  section  (Sect.  7)  will  be 
devoted  to  the  discussion  of  the  question  whether,  to  what 
extent,  and  under  what  circumstances  the  so-called  "  ex- 
port capitalism" — i.  e.,  the  investment  of  German  capital 
in  foreign  enterprises,  businesses,  and  securities,  particu- 
larly the  founding  of  subsidiary  companies  destined  ex- 
clusively for  over-sea  business,  is  necessary  and  proper. 
For  the  present  we  will  merely  note  the  fact  that  the  Ger- 
man great  banks,  since  the  beginning  of  the  second  period, 
devoted  themselves  energetically  to  the  promotion  of  our 
industrial  and  commercial  relations  with  over-sea  coun- 
tries. We  shall  attempt  now  to  describe  briefly  the  com- 
mercial objects  of  this  activity  and  the  gradual  develop- 
ment of  this  part  of  German  banking  policy. 

The  earliest  formulation  of  this  policy,  which  extends 
far  beyond  the  previous  limits  of  German  banking,  is 


420 


The     German     Great    Banks 

found  in  paragraph  2  of  the  charter  of  the  Deutsche  Bank. 
There  can  be  no  doubt  that  the  founders  of  that  institu- 
tion, in  view  of  the  general  economic  position  of  Germany, 
regarded  this  as  their  foremost  aim  and  a  necessary  and 
true  policy,  for  its  execution  was  stated  to  be  part  of  the 
program  of  the  new  bank  in  the  following  terms: 

The  object  of  the  company  is  the  transaction  of  all  sorts 
of  banking  business,  particularly  the  fostering  and  facilitating 
of  commercial  relations  between  Germany,  the  other  European 
countries,  and  over-sea  markets. 

The  purpose  of  this  program  was  to  fill  a  gap  in  the 
organization  of  German  credit  and  banking  clearly  per- 
ceived by  the  founders  and  more  particularly  by  the  early 
managers  of  the  bank.  This  "bold  stroke"  and  the  eco- 
nomic insight  disclosed  can  not  be  appreciated  too 
highly.397 

The  Deutsche  Bank  has  followed  its  ambitious  pro- 
gram398 with  the  utmost  vigor  and  tenacity,  preparing 
its  future  success  by  a  number  of  deliberate  and  far- 
sighted  measures. 

The  activity  of  the  Deutsche  Bank  as  an  intermediary  on 
behalf  of  import  and  export  trade  was  soon  taken  up  also 
by  the  Disconto-Gesellschaft,  which  in  many  lines  of  bank- 
ing activity  during  this  period  showed  a  degree  of  devel- 
opment as  large,  or  nearly  as  large,  as  the  Deutsche  Bank. 
Previously,  German  industrial  and  commercial  interests 
in  foreign,  especially  over-sea  countries  had  to  fall  back 
almost  exclusively  upon  the  intermediary  of  English  and, 
in  some  cases,  French  banking  institutions.  For  while 
bills  in  terms  of  German  currency  had  no  foreign  market, 
English  bills  particularly,  had  almost  boundless  and  unlim- 


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National    Monetary     Commission 

ited  circulation,  since  English  banks  were  represented  in 
one  form  or  another  in  all  parts  of  the  world. 

As  the  first  result  of  its  activity,  the  Deutsche  Bank 
secured  for  German  commerce  and  industry  a  firm  posi- 
tion in  the  world  market,  and  introduced  German  bills 
into  the  channels  of  over-sea  commerce  where  they  were 
almost  unknown  up  to  that  time.  This  was  especially 
difficult  at  the  beginning  of  the  period,  when  the  gold 
standard  did  not  yet  exist  in  Germany,  for  bills  in  terms 
of  the  multifarious  German  currencies  (see  p.  39)  were 
unknown  and  disliked  in  international  business,  (which 
is  transacted  mainly  by  means  of  bills,)  and  were  there- 
fore subject  to  higher  rates  of  discount  than  the  Condon 
sterling  bills.399 

In  order  therefore  to  improve  these  conditions,  the 
first  requisite  was  to  open  credit  at  London  to  the  Ger- 
man importer  and  exporter.  This  the  Deutsche  Bank 
attempted  to  do  at  first  through  an  agency  of  its  own  at 
that  place.  When  this  attempt  failed,  through  difficulties 
of  formal  nature,  the  bank  acquired  an  interest  in  the  Ger- 
man Bank  of  London,  Ltd.,  without,  however,  attaining 
fully  the  desired  object. 

On  the  other  hand,  the  German  exporter  and  importer 
was  to  be  given  an  opportunity400  "to  obtain  such  credit 
in  Germany  by  the  introduction  of  German  currency  bills 
in  over-sea  markets  and  by  offers  to  buy  the  bills  drawn  on 
German  exchange  centers."  The  Deutsche  Bank  at- 
tempted to  attain  both  these  objects  by  establishing  in 
1872,  i.  e.,  before  the  introduction  of  the  German  gold 
standard,  branches  in  Yokohama  and  Shanghai  which 
were  to  buy  bills  drawn  on  Germany,  so  that  the  Ger- 


422 


The     German     Great    Banks 

man  exporter,  who  had  calculated  the  selling  price  of  his 
goods  in  marks,  might  be  paid  abroad  in  marks,  while 
the  importer  might  credit  the  foreign  seller  at  the  bank 
with  the  amount  of  the  invoice  in  marks  and  meet  pay- 
ment in  marks  upon  bills  subsequently  drawn  by  the 
seller. 

Both  branches  in  eastern  Asia  had  to  be  closed  in  1874, 
i.  e.,  after  an  existence  of  barely  two  years,  mainly  because 
the  continuous  depreciation  of  silver  had  diminished  the 
invested  capital.  Similarly  the  I/a  Plata  bank,  opened  in 
1872  by  the  Disconto-Gesellschaft  and  taken  over  by  the 
Deutsche  Bank  in  1874,  had  to  be  liquidated  in  1885.  But 
in  the  meantime  the  Deutsche  Bank  opened  branches  in 
German  centers  of  over-sea  trade — one  in  Bremen  (in 
1871)  and  another  in  Hamburg  (in  1872).  In  the  same 
year  a  silent  partnership  (Kommandite)  in  New  York  was 
formed.  By  1871,  in  order  to  obtain  the  means  required 
for  these  enlargements  of  its  business,  its  capital  had  been 
doubled  from  5,000,000  to  10,000,000  thalers. 

Finally,  in  1873,  it  succeeded  in  opening  in  London  a 
branch  of  its  own,  whose  business  operations  soon  assumed 
considerable  proportions.  The  clients  of  the  bank,  who 
imported  goods  from  over-sea  markets,  were  now  in  posi- 
tion to  draw  their  bills  either  in  marks  on  Germany 
(Berlin,  Bremen,  Hamburg)  or  in  pounds  sterling  on 
lyondon,  as  it  appeared  to  them  more  advantageous  in 
accordance  with  the  respective  discount  and  exchange 
rates  in  the  two  countries.  Thus  the  first  and  most  diffi- 
cult stage  in  this  development  was  successfully  passed. 

It  must  be  said  that  even  the  program  of  the  Deutsche 
Bank  was  regarded  with  little  favor  in  banking  and 


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National    Monetary     Commission 

bourse  circles.  The  sentiments  prevailing  among  these 
circles  at  that  time  are  accurately  reflected  in  a  South 
German  newspaper,  which  has  been  used  by  Model  as 
the  only  journalistic  source  not  only  as  regards  this 
subject  but  also  in  discussing  the  activity  of  the  banks 
during  the  earlier  period.  This  paper 401  stated,  not  more 
than  four  weeks  before  the  foundation  of  the  Deutsche 
Bank,  that  the  houses  which  were  chiefly  interested  in  the 
projected  bank  were  "not  regarded  as  able"  to  manage 
an  institution  of  this  class  "in  accordance  with  modern 
requirements"  and  "that  its  founders  would  save  them- 
selves from  a  splendid  fiasco  if  they  were  to  take  over 
their  own  shares,  since  there  was  absolutely  no  sympathy 
for  the  project  in  Berlin." 

The  same  paper,  in  speaking  of  the  doubling  of  the 
share-capital  in  1871,  stated  that  there  was  no  need  for 
such  an  increase,  "even  if  it  were  true  that  the  bank 
intended  to  establish  silent  partnerships  in  the  regions 
peopled  by  the  Riff  pirates,  Kaffirs,  and  Blackfoot  Indians." 

After  the  initial  failures,  when  the  branches  in  Eastern 
Asia  had  to  be  closed  (in  1874),  the  following  remarks 
were  made:  ' ' The  Deutsche  Bank,  in  closing  its  branches 
in  Shanghai  and  Yokohama,  confesses  its  inability  to 
execute  its  original  high-sounding  program,  since  it  was 
primarily  founded  for  the  purpose  of  freeing  German 
commerce  in  foreign  countries,  particularly  in  China, 
Japan,  and  the  East  Indies,  from  the  tutelage  of  English 
and  French  bankers.  The  question  of  liquidation  of  the 
bank  is  now  being  seriously  debated;  at  all  events,  a  re- 
duction of  its  capital  would  seem  to  be  advisable." 


424 


The     German     Great    Banks 


A  still  sharper  criticism  of  the  Deutsche  Bank  by  the 
same  paper  in  1875  reads  as  follows:  "  One  of  those  bank- 
ing establishments,  which  has  anything  but  fulfilled  its 
program,  and  whose  right  to  exist  can  only  be  based 
on  the  fact  that,  though  long  moribund,  it  still  manages 
to  exist,  is  the  so-called  Deutsche  Bank  in  Berlin. ' 

The  Deutsche  Bank,  however,  has  not  allowed  itself 
to  be  diverted  from  its  path  either  by  its  early  failures  or 
by  criticism.  Mainly  through  its  branches  and  agency  in 
Bremen,  Hamburg,  and  London,  it  fostered  the  over -sea 
business  consistently  and  with  ultimately  brilliant  success. 
In  a  subsequent  chapter  we  shall  relate  the  attempts  of 
the  Deutsche  Bank,  and  after  it  of  a  number  of  other 
banks,  to  lend  their  energetic  and  ever-growing  support 
to  German  import  and  export  trade  by  means  of  branches 
as  well  as  through  the  founding  of  subsidiary  banks. 
The  principle  which  may  be  said  to  have  dominated  their 
entire  activity  has  been  correctly  formulated  by  Emil 
Herz 402  as  follows :  ' '  The  part  of  the  confidential  adviser 
in  business  (der  wirtschaftliche  Vertrauensmann)  both  at 
home  and  abroad  must  be  taken  by  the  banker. ' ' 

As  soon  as  German  trade  felt  certain  of  banking  sup- 
port in  its  import  and  export  activity  on  the  part  of  the 
branches  of  the  banks  in  the  great  centers  of  oversea 
trade  (Hamburg,  Bremen,  London),  or  of  the  German 
subsidiary  banks  working  hand  in  hand  with  the  parent 
banks  in  Germany,  it  naturally  emancipated  itself  from 
the  foreign  intermediaries  by  enlisting  the  usually  much 
cheaper  services  of  the  German  banks  and  their  branches 
or  of  their  subsidiary  banks. 


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National    Monetary     Commission 

Let  us  first  take  the  case  of  the  exporter.408  He  sells 
his  goods  as  a  rule  on  long  terms  for  delivery  at  over-sea 
places,  where  after  possibly  several  months'  sailing  they 
are  paid  by  the  buyer  only  when  unloaded  and  then  only 
by  means  of  the  buyer's  acceptance.  Through  his  con- 
nection with  a  German  bank  the  exporter  is  now  enabled 
to  turn  over  his  bill  of  lading  to  that  bank  with  an  order 
to  deliver  the  same  to  the  buyer  through  its  over-sea 
connection,  say  its  subsidiary  bank,  after  payment  of  the 
amount  of  the  bill  or  after  acceptance  of  the  draft,  the 
latter  in  case  the  goods  have  been  sold  on  longer  terms. 
In  case  of  nonpayment,  of  which  he  is  to  be  advised  by 
cable,  the  order  further  provides  that  the  goods  are  to  be 
insured  and  stored  at  the  over-sea  place  of  destination  at 
the  expense  of  the  seller. 

In  such  cases  the  exporter  is  usually  able  to  procure  at 
least  part  of  the  purchase  price,  and  thus  fresh  operating 
capital,  long  before  the  arrival  of  the  goods,  the  bank 
granting  him  an  advance  upon  the  floating  goods.  This 
advance  is  made  upon  the  pledging  by  indorsement  of 
the  bills  of  lading,  which  secure  the  delivery  of  the  goods 
at  the  point  of  destination  and  upon  the  transfer  of  the 
accompanying  insurance  policy  either  according  to  fixed 
loan  terms  or  according  to  such  terms  as  may  have  been 
agreed  upon  on  the  particular  occasion.  These  advances 
vary  between  40  and  75  per  cent  of  the  invoice,  a  copy 
of  which  is  to  be  handed  to  the  bank. 

It  goes  without  saying  that  such  advances  are  granted 
as  a  rule  only  on  such  goods  which  are  not  easily  subject 
to  the  risk  of  decay,  waste,  breakage,  loss  of  weight,  or 
leakage. 


426 


The     German     Great    Banks 

Provided  the  documents  are  genuine  and  the  exporter's 
personal  credit  is  good  up  to  the  amount  advanced,  the 
bank,  when  taking  the  above  precautions,  will  run  but 
little  risk.  The  risk  will  naturally  be  greater,  in  case  the 
advance  is  made  on  goods  which  are  not  yet  definitively 
sold.  In  the  latter  case,  when,  for  instance,  the  exported 
goods  are  directed  to  the  oversea  representative  of  the 
domestic  export  firm,  who  is  to  try  to  sell  them  only  upon 
arrival,  the  loan  will  be  made  as  a  rule  by  a  subsidiary 
institution  of  any  of  the  German  banks  (as  for  instance 
the  Deutsch-Ueberseeische  Bank,  the  Deutsch-Asiatische 
Bank,  the  Bank  fur  Chile  und  Deutschland,  etc.) .  These 
banks,  at  the  request  of  the  oversea  agent  of  the  domestic 
exporter,  who  turns  over  to  them  the  bills  of  lading,  will 
receive  and  store  the  goods  upon  arrival  at  destination, 
and  in  turn  will  honor  the  bills  drawn  upon  the  German 
exporter's  oversea  representative  who  takes  the  goods 
from  the  storehouse  and  gradually  makes  good  the  credit 
on  the  drafts  as  he  sells  the  goods. 

In  such  cases  the  loan  transaction  is  particularly  risky 
when  the  agents  order  too  large  a  stock  and  thus  cause 
a  reduction  in  the  price  of  the  export  goods,  which  may 
be  even  intensified,  in  case  the  banks  have  to  under- 
take the  forced  sale  of  the  goods  after  failure  of  the  subse- 
quent payments.  In  these  cases  the  bank  may  suffer  loss 
if  the  recipient  of  the  advance  proves  of  insufficient  solv- 
ency, or  the  pledged  goods — of  insufficient  value. 

Besides  granting  advances  upon  merchandise  the  banks 
render  assistance  to  the  export  trade  in  various  other 
ways.  They  will,  for  instance,  give  him  reimbursement 
(rembours)  credit  (see  p.  428,  below)  against  the  documents 


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National    Monetary     Commission 

by  attaching  their  acceptance  to  the  draft  of  the  seller, 
who  is  thus  enabled  to  discount  it  at  the  private  rate. 
The  bank  may  also  accord  its  acceptance  to  the  domestic 
exporter  on  the  basis  of  bank  credit,  extended  not  by  him 
to  the  foreign  buyer,  but  by  the  latter  to  him,  the  bank 
being  ordered  by  the  foreign  buyer  to  accept  the  drafts  of 
the  domestic  exporter  up  to  a  certain  amount,  against 
receipt  of  the  shipping  documents,  which  order  is  usually 
confirmed  by  the  bank  to  the  exporter  (' '  confirmed  letter 
of  credit ' ') . 

However,  the  most  prominent  function  of  the  branches 
of  the  German  banks  at  Hamburg,  Bremen,  and  London, 
also  of  the  oversea  banks,  is  the  financing  of  imports  from 
oversea  countries,  especially  of  raw  materials.404 

This  is  done  in  the  following  manner:  The  domestic 
buyer  of  the  article  (importer)  procures  in  the  first  place 
from  his  German  bank  a  "draft"  credit  (Trassierungs- 
kredit)  in  the  form  of  ' '  rembours ' '  credit  up  to  approxi- 
mately the  amount  of  the  invoice  in  favor  of  the  over- 
sea seller  of  the  article  (wool,  cotton,  grain,  rice,  coffee, 
ore,  etc.),  with  the  understanding,  that  the  seller,  or 
the  latter's  bank,  shall  have  authority  to  draw  upon 
the  bank  of  the  importer  to  the  extent  of  the  purchase 
price.  The  bank  will  accept  the  foreign  bill,  which  the 
oversea  seller  or  his  bank  will  send  to  it  after  the  load- 
ing of  the  goods,  or  have  presented  to  it  for  acceptance 
by  a  German  banking  connection,  only  in  case  a  full  set 
of  the  bills  of  lading  together  with  insurance  policy, 
invoice,  description  of  weight  and  quantity  and,  if  need 
be,  the  certificates  of  origin,  are  turned  over  to  it.405  In 
this  way  the  delivery  of  the  goods  to  the  bank  is  assured, 


428 


The     German     Great    Banks 

as  are  also  the  identity  of  the  article  and  the  terms  of 
sale,  as  described  by  the  importer,  as  well  as  the  fact  that 
the  particular  transaction  is  a  real,  bona  fide  commercial 
transaction,  corresponding  to  the  importer's  statement. 

After  the  bank  has  accepted  the  bill,  which  as  a  rule 
runs  for  thirty  or  one  hundred  and  eighty  days  after  sight, 
the  seller  is  enabled  to  discount  it  either  abroad  or  at  an- 
other German  bank,  the  first  bank  having  to  honor  its 
acceptance  on  maturity. 

In  case  the  importer,  as  is  normally  the  case,  has  resold 
the  goods  to  another  domestic  buyer,  the  goods  must  be 
forwarded  to  this  new  buyer.  In  that  case  the  bank  will 
have  to  deliver  to  its  customer  the  shipping  and  other 
accompanying  documents,  for  the  purpose  of  forwarding 
them  to  another  trusted  party.  This  does  away  with  its 
collateral  security,  and  up  to  the  time  of  payment  or  the 
remittance  of  a  draft  by  the  buyer  the  bank  has  to  grant 
blank  credit,  which,  however,  is  usually  of  but  short  dura- 
tion. When  this  remittance  is  received,  the  bank  dis- 
counts it,  credits  the  amount  to  the  importer  as  per  date 
of  maturity,  and  as  a  rule  finds  itself  in  possession  of  the 
cash  a  good  while  before  maturity  of  its  own  acceptance. 

In  case  the  buyer  has  not  resold  the  goods,  they  are 
stored  after  their  arrival  in  Germany,  under  the  super- 
vision of  the  bank  or  of  its  representative,  the  bank 
receiving  a  new  security  in  the  shape  of  the  storehouse 
certificate,  the  bill  of  lading  having  been  delivered  to  the 
master  of  the  vessel  at  the  time  of  unloading. 

In  the  case  of  these  import  transactions  the  granting 
of  credit  may  likewise  be  required,  as  for  instance  when 
the  German  importer  has  to  pay  at  once,  at  the  time  of 


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National    Monetary     Commission 

loading  abroad,  the  purchase  price  for  the  goods  bought. 
In  such  case  his  German  bank  accords  him  "reimburse- 
ment" credit  (Rembourskredit)  by  ordering  its  oversea 
affiliation  to  pay  the  purchase  price  upon  receipt  of  the 
documents,  the  importer  returning  the  purchase  price 
upon  arrival  of  the  goods,  or  in  case  of  sale  to  a  third 
party  (see  above)  on  return  of  the  documents. 

Finally,  if  the  importer  has  sold  the  goods  to  another 
country,  prior  to  their  shipment,  his  German  bank  will  for- 
ward the  bills  of  lading  to  its  affiliated  bank  in  that  country 
and  order  it  to  hand  the  documents  to  the  buyer  or  his 
bank  upon  payment  of  the  purchase  price  or  against 
acceptance. 

It  is  in  this  manner  that  transactions  relative  to  the 
importation  of  cotton  from  America,  of  wool  from  Aus- 
tralia, Cape  Colony  or  Argentina,  of  grain  from  Russia 
or  America,  of  rice  from  eastern  Asia,  of  copper  from 
America,  of  ores  from  Spain  and  Sweden,  are  effected  to  an 
annual  aggregate  amount  of  several  billions  of  marks.406 
As  the  underlying  documents  and  declarations  are  exam- 
ined with  extreme  care  (much  more  needed  in  this  than 
in  other  classes  of  business  transactions)  the  settlement 
is  made  as  a  rule  without  any  hitch,  since,  as  Waldemar 
Miiller  justly  remarks,  the  bank  in  granting  the  combined 
reimbursement  and  acceptance  credit,  runs  a  risk  only  in 
case  the  documents  happen  to  be  forged,  or  if  after  the 
goods  are  handed  to  the  importer  "  in  trust "  (zu  treuen 
Handeri),  the  latter  as  well  as  his  buyer  fail  at  the  same 
time.  Against  such  emergencies  the  banks  may  take 
some,  though  not  always  sufficient  precautions.407 


430 


The     German     Great    Banks 

Loans  on  merchandise  collateral  may  be  combined 
with  "reimbursement  transactions"  ("Remboursgeschdft") 
in  case  the  importer  or  his  foreign  agent  desire  to  lay 
in  abroad  a  stock  of  raw  materials.  In  the  latter  case, 
upon  receipt  of  the  acceptance  the  goods  are  held  insured 
in  store  at  the  disposal  of  the  bank  by  its  shipping  agent 
(to  whom  the  documents  are  sent)  until  such  time  as  the 
client  has  released  them  in  total  or  in  part  by  remitting 
the  corresponding  amount  of  the  purchase  price. 

It  is  clear  that  the  ' '  reimbursement ' '  business  can  be 
successfully  handled  only  by  first-class  banking  houses 
whose  acceptances  are  known  as  prime  bills  abroad  as 
well  as  at  home,  and  are  therefore  taken  without  question, 
even  in  larger  amounts.  For  such  bank  acceptances  are 
to  be  preferred  per  se  to  the  acceptance  of  the  commercial 
house  which  receives  the  goods,  and  usually  also  for  the 
additional  reason  that  they  can  be  realized  at  the  private 
rate  of  discount.  As  a  rule  these  banks  and  banking 
houses  will  grant  such  credit  in  terms  of  German  currency; 
only  in  exceptional  cases,  as  in  some  countries  of  South 
America,  Asia,  and  Australia  such  credits  will  be  in  terms 
of  pounds  sterling  and  bear  the  acceptance  of  their 
London  agency.408 

Since  as  the  result  of  continuous  efforts  mark  bills  have 
gained  a  respected  position  in  foreign  markets  alongside 
of  sterling  bills,  British  aid  and  intervention  is  no  longer 
required  in  nearly  the  same  proportion  to  settle  the  bal- 
ance of  payments  on  account  of  German  imports  and 
exports.  The  time  may  be  said  to  have  passed,  at  least 
in  the  majority  of  cases,  when  German  exporters,  in  order 
to  collect  their  foreign  claims,  and  foreign  exporters  when 


431 


National     Monetary     Commission 

selling  goods  to  Germans,  had  to  draw  on  Condon,  or 
when  German  importers  had  to  settle  the  credits  of  their 
sellers  via  London. 

When  the  Deutsche  Bank  made  its  first  efforts  to  gain 
for  mark  bills  an  equal  standing  as  compared  with  sterling 
bills,  it  had  not  merely  to  struggle  against  foreign  lack  of 
confidence  and  the  competition  of  the  English  banks, 
it  also  became  the  object  of  attack  on  the  part  of  domestic 
banking  and  other  interests  on  the  ground  that,  as  a  result 
of  the  above-described  fostering  of  our  oversea  import  and 
export  trade,  in  accordance  with  its  program,  its  accept- 
ance account  at  times  became  so  greatly  swelled  as  to 
exceed,  and  sometimes  even  greatly  exceed,  the  amount 
of  the  share  capital  of  the  bank,  even  after  the  large 
increases  of  its  capital  during  the  later  period.  But  as  was 
shown  above,  the  acceptance  business  for  the  promotion 
of  oversea  commerce,  which  is  transacted  chiefly  by  means 
of  international  bills,  contains  no  excessive  elements  of 
risk,  provided  only  due  caution  is  observed.  Hence 
in  criticising  the  extent  of  the  acceptance  accounts 
of  our  banks,  regard  should  be  had  not  so  much  to  the 
quantity  as  to  the  quality  of  the  drafts  which  the  banks 
accept. 

II.  THE  OPENING  OF  BRANCHES  IN  HAMBURG,  BREMEN, 
AND  LONDON,  AND  THE  ORGANIZATION  OF  OVERSEA  AND 
FOREIGN  BANKS,  AND  OF  DOMESTIC  SUBSIDIARY  BANKS 
FOR  OVERSEA  AND  FOREIGN  BUSINESS. 

(j)   Participations  of  the  Deutsche  Bank. 

In  the  preceding  chapter  we  saw  how  the  Deutsche 
Bank  opened  branches  first  at  Bremen  (1871),  and  Ham* 

432 


The     German     Great    Banks 

burg  (1872),  the  German  centers  of  oversea  commerce, 
and  London  (1873),  with  the  view  of  fostering  German 
oversea  import  and  export  trade.  These  branches  were  to 
serve,  so  to  say,  as  advanced  posts  for  the  observation, 
exploration,  and  winning  of  new  territory  by  the  German 
banks. 

(a)  In  1886  the  Deutsche  Bank  organized  in  place  of 
the  above-mentioned  La  Plata  Bank,  which  had  to  be 
liquidated  in  1875,  the  Deutsche  Ueberseebank  (effective 
July  i,  1887),  with  a  paid-up  capital  of  6,000,000  marks 
(10,000,000  nominal),  for  the  purpose  of  fostering  com- 
mercial relations  with  South  America,  especially  Argen- 
tina. This  bank  in  turn  was  superseded  on  June  17, 
1893,  by  the  Deutsche  Ueberseeische  Bank,409  founded  in 
Berlin  with  a  capital  of  20,000,000  marks,  and  increased  in 
1909  to  30,000,000  marks.410 

The  bank  has  had  a  continuously  prosperous  career,  as 
may  be  seen  by  the  rate  of  dividends  paid: 


l8Ql 

Per  cent. 
...     .6 

l8O7  . 

Per  cent. 
8 

1901    .  . 

Per  cent. 
8 

IQCK 

Per  cent. 
8 

1804. 

7 

l8Q8 

.  .    8 

IQO2 

.     .     .    8 

IQO6 

180^ 

l8QQ 

g 

IQOT, 

8 

IQO7 

1806.  . 

.     Q 

IQOO  .  . 

.    8 

IQO4..  . 

.    8 

1008.  . 

.    o 

The  number  of  its  branches  totals  at  present  2 1 ,  of  which 
8  are  in  Chile  (Santiago  de  Chile,  Antofagasta,  Concepci6n, 
Iquique,  Temuco,  Valdivia,  Osorno  and  Puerto-Montt) , 
4  in  Argentina  (Buenos  Aires,  Bahia  Blanca,  Cordoba,  and 
Tucuman),  4  in  Peru  (Lima,  Callao,  Trujillo,  and  Are- 
quipa),  2  in  Bolivia  (La  Paz  and  Oruro),  i  in  Uruguay 
(Montevideo),  i  in  Ecuador  (Guyaquil),  and  2  in  Spain 
(Madrid  and  Barcelona) .  The  firm  name  of  the  branches 
in  foreign  countries  reads:  Banco  Alemdn  Transatldntico. 


90311°— ii 29  433 


National    Monetary     Commission 

The  former  branch  of  the  Deutsche  Ueberseeische  Bank 
in  the  City  of  Mexico  was  merged,  in  1906,  with  the  Mexi- 
kanische  Bank  fur  Handel  und  Industrie  (see  below  under 
"m"),  founded  with  the  cooperation  of  the  Deutsche 
Bank.  In  turn  the  Deutsche  Ueberseeische  Bank  ab- 
sorbed the  firm  Guillermo  Vogel  &  Co.,  in  Madrid,  in 
which  the  Deutsche  Bank  had  previously  held  a  silent 
partnership  interest  (Kommandite) . 

(b)  In  March,  i889,411  the  Deutsche  Bank,  in  conjunc- 
tion with  the  Dresdner  Bank  and  other  institutions,  with 
the  view  of  fostering  German  commercial  relations  with 
Turkey,  founded  the  Anatolian  Railway  Company  (5o- 
ciete  du  Chemin  de  fer  Ottoman  d'Anatolie),  with  head- 
quarters at  Constantinople,  which,  having  acquired  before 
December  31,  i892,412  a  small  railway  opposite  Constanti- 
nople, undertook  to  extend  it  from  Haidar-Pasha,  near 
Constantinople,  to  Ismid  (92  kilometers) ,  thence  to  Angora 
(486   kilometers)    and   from   Eski-Shehir  to    Konia   (445 
kilometers).     The  capital  of   the  company  was  at  first 
45,000,000  and  subsequently  60,000,000  francs. 

(c)  In  the  same  year  (1889)  the  Deutsche  Bank,  jointly 
with  the  Wiener  Bankverein,  acquired  the  share  interest 
held  by  Baron  von  Hirsch  in  the  Actiengesellschaft  der 
Orientalischen  Eisenbahnen  (Oriental  Railway  Company), 
founded  in  1879  with  a  capital  of  20,000,000  Austrian  gold 
florins  and  operating  1,563  kilometers  of  railways,413  and 
with  it  the  concession  for  the  Macedonian  line  Saloniki- 
Monastir.     This    concession  it  ceded  to  the   Societe  du 
Chemin  de  fer  Ottoman  Salonique-Monastir,  founded  Feb- 
ruary 5,  1891  (with  headquarters  at  Constantinople),  with 
a  share  capital  of  20,000,000  marks  and  debentures  of 
60,000,000  francs. 

434 


The     German     Great    Banks 

In  North  America  the  Deutsche  Bank  maintains  very 
active  business  connections,  resulting  in  numerous  finan- 
cial transactions  and  underwriting  of  American  public 
securities,  treasury  bonds,  various  railway  bonds,  and 
other  railway  transactions.  The  temporary  depression  in 
the  price  of  Northern  Pacific  securities  caused,  for  the  time 
being,  grave  anxiety  to  the  bank,  which  was  terminated 
by  the  reorganization  of  the  railroad,  effected  under  its 
auspices. 

At  first  (beginning  with  October  15,  1872)  the  bank 
secured  a  silent  partnership  interest  in  the  banking  firm 
of  Knoblauch  &  Lichtenstein,  in  New  York,414  amounting 
to  $500,000  currency  (1,845,000  marks),  but  as  a  result 
of  financial  losses  of  that  firm  it  had  to  reduce  its  par- 
ticipation to  $400,000  (1,680,000  marks),415  while  the 
liquidation  of  the  firm,  which  took  place  October  15,  1882, 
caused  even  a  loss  of  about  700,000  marks.416 

In  1890  the  Deutsche  Bank,  mainly  because  of  its  con- 
nection with  many  American  railroads,  especially  the  North- 
ern Pacific  Railroad  Company,  instituted,  in  conjunction 
with  Frankfort  and  American  houses,  the  Deutsch-Ameri- 
kanische  Treuhand-Gesellschaft  (German-American  Trust 
Company)  at  Berlin,  with  a  nominal  share  capital  of 
20,000,000  marks,  whose  main  object  was  to  issue  its 
own  debentures  on  the  basis  of  solid  American  securi- 
ties to  be  purchased  by  it,  and,  in  the  second  place,  to 
represent  the  interests  of  holders  of  securities  issued  by 
American  enterprises  which  had  become  insolvent.  When 
the  first  object  of  the  company,  mainly  in  view  of  the 
precarious  financial  situation  in  the  United  States,  was 
found  to  be  unrealizable,  the  capital  of  the  company  was 


435 


National    Monetary     Commission 

at  first  reduced  to  i  ,000,000  marks.417  Later  on,  by  the 
by-law  (Statut)  dated  December  9,  1901,  the  company 
was  reconstructed  under  the  new  name  of  Deutsche  Treu- 
hand-Gesellschaft.  While  the  second  of  the  above-named 
purposes  still  remained  one  of  the  objects  of  the  recon- 
structed company  (whose  capital  was  increased  to  i  ,500,000 
marks) ,  its  principal  function  became  the  examination  of 
the  accounts  of  stock  companies  and  the  undertaking  of 
trustee  operations  and  those  of  pledge  holding.  Its  activ- 
ity in  these  fields  has  proved  eminently  satisfactory. 

In  1889  the  Deutsche  Bank,  with  the  view  of  promoting 
commercial  relations  between  Germany  and  Eastern  Asia, 
participated  in  the  founding  of  the  Deutsch-Asiatische 
Bank  at  Shanghai,  with  a  capital  of  7,500,000  taels.  (See 
III,  par.  i,  below.) 

(d)  With  the  view  of  executing  the  financial  part  of  the 
tasks   of   the   Anatolian    Railway   Company,    there   was 
founded  at  Zurich  in  1890,  with  the  participation  of  the 
Deutsche  Bank,  the  Bank  filr  Orientalische  Eisenbahnen, 
with  a  nominal  capital  of  50,000,000  francs  of  common 
shares  (Stammaktieri)  and   13,000,000  francs  of  preferred 
shares    (Vorzugsaktieri).418    The    debenture  capital    since 
May,  1907,  amounts  to  30,000,000  francs. 

(e)  In    1894,   with  the  view  of  fostering  commercial 
relations  between  Germany  and  Italy,  the  Deutsche  Bank 
participated  in  the  founding  of  the  Banca  Commerciale 
Italiana    at    Milan,    the    present    capital    of    which    is 
105,000,000  lire.     (For  particulars,  see  III,  par.  2.) 

(/ )  Between  the  years  1898  and  1904  the  Deutsche 
Bank,  together  with  other  banks  and  firms,  participated 


436 


The     German     Great    Banks 

in  the  founding  of  the  Deutsch-Atlantische,  Ost-Euro- 
paische  und  Deutsch-Niederldndische  Telegraphen-Gesell- 
schaft,  and  the  Norddeutsche  Seekabelwerke  (North-German 
marine  cable  works).  In  1908  it  took  part  in  the  found- 
ing of  the  Deutsch-Sudamerikanische  Telegraphen-Gesell- 
schaft.  (See  pp.  458  and  459,  No.  6.) 

(g)  In  1899  the  Deutsche  Bank  cooperated  in  the 
launching  of  the  Schantung-Bergbau-  and  the  Schaniung- 
Eisenbahngesellschaft  (Shantung  Mining  and  Shantung 
Railway  Companies)  founded  by  a  number  of  German 
banks  and  firms.  See  pp.  458  and  459,  No.  6.) 

(ti)  When  in  1901  the  Anatolian  Railway  Company  was 
granted  the  concession  for  the  extension  of  its  lines  from 
Konia  to  Bagdad  and  the  Persian  Gulf,419  that  company, 
in  conjunction  with  a  number  of  Turkish,  German, 
Austrian,  French,  Swiss,  and  Italian  firms,  founded  the 
Imperial  Ottoman  Bagdad  Railway  Company.420  During 
1 905  a  controlling  interest  in  the  railroad  between  Mersina 
and  Adana  was  acquired  in  behalf  of  the  Bagdad  Rail- 
way, the  first  portion  of  which,  from  Konia  to  Burgulu, 
was  opened  for  traffic  October  25,  1904.  In  the  spring 
of  1908,  "after  four  years  of  laborious  negotiations,"421 
the  required  state  guarantees  were  at  last  secured  for  the 
further  construction  of  the  Bagdad  Railway  over  the 
Taurus  and  Amanus  mountains  to  Syria  and  upper  Meso- 
potamia as  far  as  El  Helif  near  Mardin  (840  kilometers 
from  the  last  point  reached  by  the  Bagdad  Railway  in 
1908,  1,738  kilometers  from  Constantinople,  and  about 
1,155  kilometers  from  Bassora  on  the  lower  Shatt-el- 
Arab) ,  ' '  assuring  thus  the  furtherance  of  this  great 
undertaking. ' ' 


437 


National    Monetary     Commission 

(i)  In  1904  the  bank  founded  the  Ost-Afrikanische 
Gesellschaft  (Bast- African  Company),  with  headquarters 
in  Berlin,  a  colonial  company  with  21,000,000  marks  of 
nominal  capital,  the  Empire  guaranteeing  a  minimum 
interest  return  of  3  per  cent  and  repayment  at  the  rate 
of  1 20  per  cent. 

(k)  In  1904-1905  the  Deutsche  Bank  participated  in 
the  founding  of  the  Deutsch-Ost-Afrikanische  Bank  with  a 
capital  of  2,000,000  marks  and  central  office  at  Berlin, 
which  is  both  a  credit  and  note  issuing  bank  for  the  Ger- 
man colony  of  Bast  Africa.  (See  III,  sec.  3,  below.) 

(/)  In  December,  1905,  the  Deutsche  Bank,  in  con- 
junction with  the  Deutsche  Ueberseeische  Bank,  the 
banking  house  of  Lazard  Speyer-Bllissen  in  Frankfort- 
on-the-Main  and  the  Schweizerische  Kreditanstalt,  with 
the  view  of  promoting  German  commercial  relations  with 
Central  America,  founded  the  Zentral-Amerika-Bank, 
Aktiengesellschaft,  with  central  office  at  Berlin  and  a 
capital  of  10,000,000  marks,  of  which  25  per  cent  was 
paid  in  for  the  time  being.  But,  as  the  company  was 
unable  to  secure  the  state  concession  for  the  transaction 
of  banking  operations  for  its  proposed  branch  in  Guate- 
mala, the  original  object  of  the  enterprise  was  changed 
in  1906,  so  that  the  present  name  reads  Aktiengesellschaft 
fur  uberseeische  Bauunternehmungen  ("  Company  for  over- 
sea building  enterprises")-  Its  present  object  has  thus 
been  considerably  narrowed.  Dividends  paid  during  1905 
to  1908  were:  o,  o,  5,  and  4  per  cent. 

(m)  In  1906  the  Deutsche  Bank,  in  conjunction  with 
the  banking  house  of  Speyer  &  Co.  in  New  York,  with 
the  view  of  promoting  German  commercial  interests  in 


438 


The     German     Great    Banks 

South  America  and  more  especially  in  Mexico,  founded 
the  Mexikanische  Bank  fur  Handel  und  Industrie  (Banco 
Mejicano  de  Comercio  e  Industria),  with  its  main  office 
in  New  York.  This  bank,  as  stated  above,  assumed  the 
business  of  the  Banco  Aleman  Transatlantic©  in  Mexico; 
its  nominal  capital  is  10,000,000  pesos,  the  term  of  its 
concession  is  forty  years;  the  dividends  paid  in  1907  and 
1908  were  at  the  rate  of  6  per  cent. 

As  regards  the  foreign  participations  of  the  Deutsche 
Bank  in  Europe  it  may  be  stated  that — 

(n)  The  bank  had  entered  into  a  silent  partnership 
as  early  as  January  i,  1873,  with  the  Paris  banking  house 
of  Weissweiller  &  Goldschmidt 422  by  a  participation 
(Kommanditeinlage)  of  1,000,000  francs,  but  this  partici- 
pation was  reduced  to  500,000  francs  as  early  as  1876, 
and  terminated  soon  after,  owing  to  the  liquidation  of 
that  firm. 

(0)  In  1877  (Oct.  i)  the  Deutsche  Bank  entered  into  a 
silent  partnership  with  the  Vienna  banking  house  of 
Giiterbock,  Horwitz  &  Co.  by  a  participation  of  750,000 
florins  (1,290,000  marks),  which  was,  however,  repaid 
December  31,  1883. 423 

(p)  In  1895  the  Deutsche  Bank  formed  a  silent  part- 
nership with  another  Vienna  banking  firm,  Rosenfeld  & 
Co.,  but  subsequently  organized  a  group  of  German  and 
Austrian  banks  for  the  purpose  of  participating  in  Aus- 
trian and  Hungarian  business. 

(q)  In  1895  the  Deutsche  Bank  entered  into  a  silent 
partnership  with  the  Madrid  firm  Guillermo  Vogel  & 
Co.434  The  latter,  as  mentioned  above,  was  taken  over 
in  1906  by  the  Deutsche  Ueberseeische  Bank. 


439 


National    Monetary     Commission 

(r)  The  bank  became  interested  in  the  mining  business 
in  the  early  nineties  by  a  participation  in  the  firm  Ad. 
Goerz  &  Co.,  of  Berlin  and  Johannesburg. 

Almost  all  the  other  great  banks  followed  the  example 
of  the  Deutsche  Bank  in  developing  and  extending  for- 
eign and  oversea  relations,  some  of  them  rapidly  and 
energetically,  others  hesitatingly  and  to  an  inconsiderable 
extent.  The  bank  which  did  so  most  rapidly  and  exten- 
sively was  the  Disconto-Gesellschaft. 

(2)  PARTICIPATIONS  OF  THE  DISCONTO-GESELLSCHAFT. 

This  bank  as  early  as  1873  had  participated  in  the 
founding  of  the  I^a  Plata  Bank,  subsequently  transferred 
to  the  Deutsche  Bank. 

(a)  In  1880  the  Disconto-Gesellschaft  cooperated  in 
the  reconstruction  of  the  Deutsche  Handels-  und  Planta- 
gen-Gesellschaft  der  Sudseeinseln  (German  Commercial  and 
Plantation  Company  of  the  South  Sea  Islands).  The 
capital  of  this  company  was  2,750,000  marks.  During 
1883-1887,  at  the  instigation  of  Ad.  von  Hansemann, 
it  cooperated  in  the  organization  and  founding  of  the 
Neu-Guinea-Kompagnie  (with  a  capital  of  6,000,000 
marks) . 

(6)  In  1887  the  Disconto-Gesellschaft,  in  conjunction 
with  the  Norddeutsche  Bank,  founded  the  Brasilianische 
Bank  fur  Deutschland*25  with  main  office  in  Hamburg 
and  a  capital  of  10,000,000  marks,  for  the  promotion  of 
commercial  relations  between  Germany  and  Brazil.  This 
bank  has  at  present  (1908-9)  five  branches  (in  Rio  de 
Janeiro,  Sao  Paulo,  Santos,  Porto  Allegre,  and  Bahia). 
The  rates  of  dividends  were  as  follows : 


440 


Th 


e  r  m  a  n 


G 


r  e  a 


t    B 


a  n 


Fiscal  year  ending  June  30  — 

Dividends. 

Fiscal  year  ending  June  30  — 

Dividends. 

1890 

Per  cent. 

Per  cent. 
9 

1891                  

10 

1901  

8 

1892 

16 

6 

1893 

'i  6 

6 

1894  

8$ 

1904    

8 

180? 

1896 

1906                         

IO 

1897 

1898 

1908 

IO 

1899                  

12 

(c)  In   1889  the  Disconto-Gesellschaft  participated  in 
the  founding  of  the  Deutsch-Asiatische  Bank,426  organized 
by  seven  Berlin  banks  with  the  view  of  fostering  German 
trade  with  eastern  Asia  (cfr.,  p.  455,  No.  i).     Particulars 
regarding  this  bank  are  found  further  below. 

(d)  In    1890    the    Disconto-Gesellschaft    entered    into 
silent   partnership   connections    (Kommandite)   with    the 
banking  firm  of  Ernesto  Tornquist  in  Buenos  Aires,  and 
the  Antwerp  firm  H.  Albert  de  Bary  &  Co.,  allied  with  the 
former,  the  aggregate  participation  being  2,187,000  marks. 
The  latter  firm  was  transformed  in  1900  into  the  stock 
company  "Compagnie  Commerciale  Beige,  anciennement 
H.  Albert  de  Bary  &  Co.,"  with  a  share  capital  of  5,000,000 
francs,  the  Disconto-Gesellschaft  continuing  its  partici- 
pation through  ownership  of  stock.427 

(e)  In  1894  it  cooperated  in  the  formation  of  the  Banco, 
Commerciale  Italiana  (see  below,  p.  456,  No.  2). 

(/)  In  1895  the  Disconto-Gesellschaft,  together  with 
the  Norddeutsche  Bank,  and  in  cooperation  with  several 
business  houses  having  trade  connections  with  Chile, 
founded  the  Bank  fur  Chile  und  Deutschland 428  at  Ham- 
burg with  a  capital  of  10,000,000  marks.  This  bank  has 


441 


National    Monetary     Commission 

now  nine  branches  in  Valparaiso,  Santiago,  Concepcion, 
Temuco,  Iva  Paz,  Oruro,  Antofagasta,  Victoria,  and 
Valdivia.  Its  dividends  show  the  following  development : 

1896,  o  per  cent;  1897,  5  per  cent;  1898,  2  per  cent;  1899-1901,  7  per 
cent;  1902-6,  8  per  cent;  1907,  4  per  cent;  1908,  8  per  cent. 

(g)  In  1897  the  Disconto-Gesellschaft  in  conjunction 
with  the  firm  of  S.  Bleichroder,  founded  the  Banca 
Generala  Romano, 429  in  Bucharest  for  the  promotion  of 
German-Roumanian  trade  relations.  The  bank  has  now 
(1909)  two  branches  in  Braila  and  Craiova,  and  an  agency 
in  Constanza.430  Its  capital  is  10,000,000  francs  (I/ei). 
Its  rates  of  dividends  were  as  follows: 

1898,  6  per  cent;  1899,  5  per  cent;  1900,  7  per  cent;  1901,  8  per  cent; 
1902-3,  o  per  cent;  1904,  6  percent;  1905,  8  percent;  1906-8,  9  per  cent. 

(h)  In  1898  the  Disconto-Gesellschaft  participated  in 
conjunction  with  a  number  of  domestic  and  foreign  firms 
in  the  founding  of  the  Banque  Internationale  de  Bruxelles 
for  the  promotion  of  German-Belgian  trade  relations.  The 
nominal  capital  of  the  new  bank  was  25,000,000  francs. 
It  paid  the  following  rates  of  dividends : 

1899,  6  per  cent;  1900,  4  per  cent;  1901-3,  o  per  cent;  1904,  4  per  cent; 
1905-8,  5  per  cent. 

(i)  In  1899  the  Disconto-Gesellschaft  participated,  in 
conjunction  with  a  number  of  German  banks  and  bank- 
ing houses,  in  the  founding  of  the  Shantung  Railroad  and 
Shantung  Mining  companies  (particulars  for  which  are  given 
below).  During  the  period  1898-1904  and  again  in  1908 
it  took  part  also  in  the  organization  of  several  telegraph 
and  cable  companies  (see  below,  pp.  458  and  459,  No.  6). 

(k)  In  1900  the  Disconto-Gesellschaft  founded  the  Otavi 
Mining  and  Railroad  Company  with  a  capital  of  i  ,000,000 
marks,  which  was  increased  to  20,000,000  marks  as  early 

442 


The     German     Great    Banks 

as  May  12,  1903,  for  the  purpose  of  constructing  a  railway 
between  Swakopmund  and  Tsumeb.  Through  the  com- 
pletion of  a  branch  line  between  Onguati  and  Karibib  a 
junction  was  effected  in  1906  with  the  main  line  Swakop- 
mund-Windhuk.431 

(/)  In  1904  it  founded  the  East  African  Railroad  Com- 
pany, with  a  share  capital  of  21,000,000  marks.  A 
minimum  dividend  of  3  per  cent  on  this  capital,  as  well  as 
a  redemption  price  of  120  per  cent,  have  been  guaranteed 
by  the  Empire. 

(m)  In  1 904-5  the  Disconto-Gesellschaft  took  part  in  the 
establishment  of  the  German-East  African  Bank,  with  the 
main  office  at  Berlin  and  a  branch  at  Dar-es-Salaam, 
which  acts  as  a  credit  and  note-issuing  bank  for  the 
German  East  African  colony. 

(ri)  In  1905  the  Disconto-Gesellschaft,  together  with 
the  firm  of  S.  Bleichroder,  the  Norddeutsche  Bank,  and 
several  Bulgarian  firms,  for  the  purpose  of  fostering  Ger- 
man-Bulgarian trade  relations,  established  the  Banque  de 
Credit  (Kreditna  Banka)  at  Sophia,  with  a  nominal  capital 
of  3,000,000  francs  (lev). 

(o)  In  the  same  year  (1905)  the  Disconto-Gesellschaft 
in  conjunction  with  the  firm  C.  Woermann  at  Hamburg, 
established  the  Deutsche  Afrika-Bank  with  a  capital  of 
1,000,000  marks.  This  bank  opened  branches  in  1904  at 
Swakopmund,  Windhuk,  and  Luderitzbucht  and  took 
over  the  business  at  those  places  of  the  Damara  and 
Namaqua  Trading  Company  (Limited)  which  had  been 
founded  in  1904  by  the  above-mentioned  firm. 

(p)  By  the  taking  over  of  stock  in  1905  the  Disconto- 
Gesellschaft  became  interested  in  the  General  Mining 


443  ' 


National     Monetary     Commission 

and  Finance  Corporation  (Limited)  in  London,  founded 
by  the  Dresdner  Bank  in  conjunction  with  Albu  Broth- 
ers, with  a  capital  of  £i  ,250,000.  The  investment  did  not 
prove  profitable,  as  may  be  inferred  from  the  fact  that  the 
value  of  this  stock  as  carried  on  the  books  of  the  company 
had  to  be  reduced  considerably  several  times. 

(q)  In  1906  the  Disconto-Gesellschaft  in  conjunction 
with  a  number  of  German  banks,  banking  houses,  and 
firms  took  part  in  the  foundation  of  the  Kamerun  Rail- 
road Company.  (See  below,  p.  458,  No.  5.) 

It  is  noteworthy  that  to  the  end  of  the  nineties  the 
Disconto-Gesellschaft  adhered  to  the  principle  of  strict 
centralization  in  the  internal  management  of  its  affairs. 
In  particular  it  discountenanced  the  opening  of  branches 
for  the  promotion  of  over-sea  trade.  It  should  be  said 
though,  that  it  had  been  represented  for  years  at  Ham- 
burg by  the  Norddeutsche  Bank,  with  which  it  had 
become  closely  allied  during  the  first  period. 

It  was  only  in  1900  that  the  Disconto-Gesellschaft,  in 
view  of  the  considerable  growth  of  its  own  over-sea 
connections,  decided  upon  the  opening  of  a  branch  in 
London,  followed  in  1903  by  the  opening  of  another 
branch  in  Bremen. 

It  may  be  also  noted  that  as  early  as  1888  the  Disconto- 
Gesellschaft,  together  with  the  Norddeutsche  Bank 
entered  into  an  agreement  with  the  firm  Friedr.  Krupp, 
which  had  obtained  a  state-guaranteed  concession  for  the 
construction  of  the  Great  Venezuelan  Railroad  between 
Caracas  and  Valencia  with  a  total  length  of  180  kilo- 
meters, by  which  it  took  over  the  construction  of  that 
road432.  The  transaction,  while  resulting  in  considerable 


The     German     Great    Banks 

contracts  and  orders  for  German  industry,  caused  the  bank 
numerous  long-continued  troubles  and  annoyances  of 
all  kinds. 

Finally,  it  should  not  be  overlooked  that  the  Disconto- 
Gesellschaft,  as  a  member  of  the  Rothschild  Syndicate, 
participated  in  a  large  number  of  Austro- Hungarian  state, 
railroad,  and  other  finance  transactions,  took  part  in  1887 
and  1888  in  the  emission  of  Argentine  loans,  and  partici- 
pated in  a  number  of  finance  and  loan  operations  in  behalf 
of  the  Finnish,  Russian,  and  Roumanian  Governments 
and  railroads.  (For  particulars  see  App.  V  and  VI.) 

(3)  PARTICIPATIONS  OF  THE  DRESDNER  BANK. 

(a)  With  the  view  of  promoting  its  foreign,  particularly 
its  over-sea  relations,  the  Dresdner  Bank  founded  the  fol- 
lowing branches:  1892,  one  in  Hamburg;  1895,  one  in 
Bremen,  and  1901,  one  in  London. 

(6)  In  1889  the  Dresdner  Bank  participated  in  the 
founding  of  the  Anatolian  Railway  Company,  also  of  the 
Company  for  the  Operation  of  the  Oriental  Railroads  (see 
above,  i  b  and  c) ,  and  in  the  establishment  of  the  Deutsch- 
Asiatische  Bank.  (See  below,  p.  455,  No.  i.)  In  1891  it 
took  part  in  the  founding  of  the  Bank  for  Oriental  Rail- 
roads. (See  above  sub.  id.) 

(c)  In  1894  it  participated  in  the  founding  of  the  Banca 
Commerciale  Italiana.     (See  below,  p.  456,  No.  4.) 

(d)  In  1899  it  took  part  in  the  founding  of  the  Shantung 
Mining  and  Shantung  Railway  companies.     (See  below, 
pp.  458  and  459,  No.  6.) 

(e)  In  1904-5  it  participated  in  the  founding  of  the 
German  West- African  Bank.     (See  below,  p.  457,  No.  4.) 


445 


National    Monetary     Commission 

(/)  In  1905  it  entered  into  a  close  alliance  with  the 
banking  house  J.  P.  Morgan  &  Co.,  of  New  York,  London, 
and  Paris433,  for  the  purpose  of  common  action  in  the 
field  of  international  finance  and  issue  operations  and  of 
extending  the  German  market  for  American  securities. 
This  alliance  led  to  the  common  participation  of  the  two 
parties  in  the  now  liquidated  Sovereign  Bank  of  Canada 
at  Montreal. 

(g)  About  the  end  of  1905  the  Dresdner  Bank,  in  con- 
junction with  the  A.  Schaaffhausen'scher  Bankverein  and 
the  Nationalbank  fur  Deutschland,  with  the  view  of  pro- 
moting trade  relations  with  the  Orient,  especially  with 
Turkey,  Greece,  and  Egypt,  founded  the  Deutsche  Orient- 
bank  stock  company  in  Berlin,  with  a  share  capital  (now 
fully  paid-in)  of  16,000,000  marks434  and  two  branches 
in  Constantinople  and  Hamburg,  taken  over  from  the 
Banque  d 'Orient  in  Athens.  Since  then  additional 
branches  have  been  opened  in  Alexandria,  Brussa,  Cairo, 
Kalamata,  Smyrna,  and  Casablanca  (Morocco).  Divi- 
dends in  1906  were  4  per  cent,  in  1907,  4  per  cent,  and  in 
1908,  4  per  cent. 

(h)  About  the  same  time  (end  of  1 905 435)  the  Dresdner 
Bank,  with  the  view  of  promoting  German  commerce  with 
South  America,  founded  jointly  with  the  A.  Schaaff- 
hausen'scher Bankverein  the  Deutsch-Sudamerikanische 
Bank  stock  company,  with  the  main  office  at  Berlin,  and 
a  nominal  capital  of  20,000,000  marks,  divided  into  4  series 
of  5,000,000  marks  each.  This  bank  has  at  present  (1909) 
3  branches  (in  Hamburg,  Buenos  Aires,  and  Mexico). 
In  1908  it  entered  into  close  relation  with  the  above-men- 
tioned Sovereign  Bank  of  Canada  in  Montreal  (capital 


446 


The     German     Great    Banks 

$2,000,000),  severed  however  in  1908  by  reason  of  the 
liquidation  of  the  Canadian  bank.  No  dividends  have 
as  yet  (i.  e.,  for  the  years  1906,  1907,  and  1908)  been 
declared  by  the  Deutsch-Sudamerikanische  Bank. 

(i)  In  1906  the  Dresdner  Bank  participated,  in  con- 
junction with  several  German  banks,  banking  houses,  and 
commercial  firms,  in  the  founding  of  the  Kamerun  Rail- 
way Company.  (See  below,  p.  458,  No.  5.) 

(k)  It  became  interested  in  the  mining  business  by  par- 
ticipating, in  company  with  the  Disconto-Gesellschaft,  in 
the  General  Mining  and  Finance  Corporation,  London, 
which  had  been  founded  by  it  jointly  with  Albu  Brothers, 
with  a  capital  of  £1,250,000. 

The  Dresdner  Bank  also  participated  in  the  emission  of 
the  1905  Chinese  state  loan,  in  the  5  per  cent  loan  of  the 
Tehuantepec  National  Railway  Company,  and  in  two 
(4-X  Per  cent  and  4  per  cent)  Japanese  gold  loans.  (For 
particulars,  see  Append.  V  and  VI.) 

(4)  PARTICIPATIONS  OF  THE  DARMSTADTER  BANK. 

The  Darmstadter  Bank  up  to  the  present  has  not 
established  any  branches  for  the  promotion  of  over-sea 
trade.  But  as  early  as  1854  it  acquired  a  silent  partner- 
ship interest  (Kommandite) — the  first  of  similar  inter- 
ests— in  the  New  York  firm  E.  vom  Baur  &  Co.  This 
firm,  however,  went  into  liquidation  about  the  end  of 
i885.436  In  1900,  jointly  with  the  Bankers'  Trading  Syndi- 
cate of  London — its  own  creation — which  in  turn  was 
closely  allied  with  the  banking  house  S.  Japhet  &  Co.  and 
the  Nordwestdeutsche  Bank  (subsequently  the  Deutsche 
Nationalbank,  Kommanditgesellschaft  auf  Aktien)  of 


447 


National    Monetary     Commission 

Bremen,  it  took  the  first  steps  for  the  promotion  of  foreign 
business. 

In  1906,  with  the  view  of  extending  business  relations 
with  the  United  States,  it  founded,  in  cooperation  with 
other  German  and  American  banking  firms,  the  Amerika- 
Bank,  a  stock  company  in  Berlin,  with  a  capital  of 
25,000,000  marks,  divided  into  5  series,  of  which  5,000,000 
marks  were  fully  paid  in,  and  the  rest  to  the  extent  of  25 
per  cent,  while  10  per  cent  premium  on  the  shares,  i.  e., 
2,500,000  marks,  was  placed  into  the  reserve  fund. 
However,  this  bank  went  into  liquidation  in  1909,  and  its 
shares  were  taken  over  by  the  Darmstadter  Bank. 

The  Darmstadter  Bank  participated  in  the  launching 
of  the  following  organizations  for  the  promotion  of  over-sea 
commercial  relations: 

(a)  1889:  In  the  founding  of  the  Deutsch-Asiatische 
Bank.  (See  below,  p.  455,  No.  i.) 

(6)  1 898-1 904  and  1 908 :  In  the  founding  of  several  tele- 
graph and  cable  companies.  (See  below,  pp.  458  and  459, 
No.  6.) 

(c)  1899:  In  the  founding  of  the  Shantung  Mining  and 
the  Shantung   Railway  Companies.      (See   below,  ibid., 
No.  6.) 

(d)  1906:  In  the  founding  of  the  Kamerun  Railway 
Company.     (See  below,  p.  458,  No.  5.) 

Its  own  foreign,  though  not  over-sea  connections,  were 
quite  numerous  even  during  the  first  period. 

(a)  As  early  as  1857,  for  the  purpose  of  promoting  busi- 
ness with  France,  it  formed  a  commandite  in  Paris.  The 
latter,  after  excellent  results,  had  to  be  liquidated  in  1871, 
owing  to  the  unfriendly  sentiment  then  prevailing.  In 


448 


The     German     Great    Banks 

1873  a  new  commandite  was  established,  which,  however, 
went  into  liquidation  shortly  after,  in  1877. 

(6)  In  1870  a  commandite  was  formed  in  Vienna 
(Dutschka  &  Co.),  which  was  liquidated  in  1902.  Its 
clientele  was  taken  over  by  the  Wechselstuben-Aktien- 
gesellschaft  Merkur  in  Vienna,  which  in  1908  had  a  capital 
of  20,000,000  kronen  ($4,060,000)  and  9  branches.  There 
is  a  close  alliance  between  this  institution  and  the  Darm- 
stadter  Bank. 

(c)  In    1871    it  founded  for   the  promotion   of  trade 
between  Germany  and  the  Netherlands  the  Amsterdamsche 
Bank  in  Amsterdam,437  with  which  it  has  since  main- 
tained the  most  intimate  relations.     Simultaneously,  for 
promoting  trade  with  Belgium  a  commandite  was  formed 
in  Brussels. 

(d)  In    1873-74    the    bank    formed    a    commandite    in 
Milan.438 

(e)  In  1877  the  Darmstadter  Bank,  jointly  with  other 
firms,  founded  the  Ungarische  Escompte-  und  Wechslerbank 
in  Budapest. 

(/)  In  1 88 1  it  founded  the  Wurttembergische  Bankan- 
stalt,  formerly  Pflaum  &  Co.,  in  Stuttgart  (share  capital, 
in  1909,  10,000,000  marks),  which  in  turn  formed  in  the 
same  year  a  contractual  community  of  interest — the 
earliest  union  of  this  class — with  the  Wiirttembergische 
Vereinsbank. 

(g)  In  1890  it  acquired  a  commandite  interest  in  the 
banking  house  Marmorosch  Blank  &  Co.  in  Bucharest.  In 
conjunction  with  the  Berliner  Handelsgesellschaft  it  trans- 
formed that  firm  into  a  stock  company  under  the  name  of 
the  Banca  Marmorosch  Blank  &  Co.,  Societate  Anonima 

90311°— ii 30  449 


National    Monetary     Commissio 


n 


(effective  January  i,  1905),  whose  capital  amounts  at 
present  to  10,000,000  lei  ($1,930,000). 

(ti)  In  1898  it  founded,  in  conjunction  with  a  number 
of  domestic  and  foreign  houses,  the  Banque  Internationale 
de  Bruxelles,  with  a  capital  of  25,000,000  francs. 

It  also  became  interested  in  the  mining  business  through 
the  acquisition  of  shares  of  the  Consolidated  Mines  Selec- 
tion Company  and  of  the  African  Venture  Syndicate 
founded  in  1903. 

During  the  second  period  it  participated  in  all  the 
Austrian  and  Hungarian  emissions  of  the  Rothschild 
group,  and  together  with  several  other  banks  and  banking 
houses  took  part  in  the  emission  of  Portuguese  state, 
municipal,  and  railroad  securities,  which  latter  operations 
for  several  years  proved  a  source  of  great  trouble  and 
financial  losses.  It  also  shared  in  the  emission  of  the  5 
per  cent  Chinese  state  loan,  the  4^  and  4  per  cent  Japanese 
loans  of  1905,  and  other  finance  ocerations,  for  which  see 
Appendices  V  and  VI. 

(5)  PARTICIPATIONS  OF  THE  BERLINER  HANDELSGESEIV!,- 

SCHAFT. 

The  Berliner  Handelsgesellschaft  participated  in  the 
founding  of  the  following  companies  for  the  promotion  of 
German  oversea  interests: 

(a)  1889:   Deutsch-Asiatische    Bank.      (See    below,   p. 
455,  No.  i.) 

(b)  1 898-1 904  and  1 908 :  Several  German  cable  companies 
and  cable  works.     (See  below,  pp.  458  and  459,  No.  6.) 

(c)  1899:  Shantung    Railway    and    Shantung    Mining 
companies. 


450 


The     German     Great    Banks 

(d)  1906:  Kamerun  Railway  Company. 

Among  its  foreign,  other  than  oversea  connections,  the 
following  may  be  mentioned: 

It  had  a  share  in  the  founding  of  the  following  institu- 
tions : 

(e)  1872:  Sckweizerischer  Bankverein  in   Basel  with  a 
share  capital  of  50,000,000  francs. 

(/)  1898:  Banque  Internationale  de  Bruxelles  (jointly 
with  several  other  firms) . 

(g)  1904-5:  Banca  Marmorosch  Blank  &  Co.,  Societate 
anonima  in  Bucharest  (jointly  with  the  Darmstadter 
Bank). 

(h)  1908:  Stock  company  formerly  Andreevics  &  Co. 
in  Belgrade,  with  a  share  capital  of  4,000,000  francs  (jointly 
with  the  Pester  Ungarische  Commerzialbank) . 

Moreover  the  Berliner  Handelsgesellschaft  maintains 
close  relations  to  the  stock  company  Labouchere  Oyens  & 
Co.  Bank  in  Amsterdam  (capital  6,000,000  florins)  and 
since  1903  to  the  New  York  banking  house,  Hallgarten 
&Co. 

It  also  took  part 439 

1887 :  In  the  founding  of  the  Dutch  South  African  Rail- 
road Company  in  Amsterdam.440 

1889:  In  the  acquisition  of  the  Egyptian  railroad 
system.441 

1894:  In  the  founding  of  the  Banca  Commerciale  Ita- 
liana. 

1894:  In  the  founding  of  the  Compania  Sevillana  de 
Electricidad  in  Sevilla  and  the  Compania  Barcelonesa  de 
Electricidad  in  Barcelona. 


451 


National    Monetary     Commission 

1897:  In  the  founding  of  the  Bank  fur  elektrische 
Unternehmungen  in  Zurich. 

1898:  In  the  founding  of  the  Aluminium-Industrie- Ak- 
tiengesellschaft  in  Neuhausen  (Switzerland). 

1898:  In  the  founding  of  the  Deutsch-Ueberseeische 
Elektrizitdtsgesellschaft  (German  Oversea  Electric  Com- 
pany). 

1899:  In  the  establishment  of  the  Deidsch-Ostafrika 
Linie  (German  East  Africa  Steamship  Line) . 

1903:  In  founding  the  Deutsch-Chinesische-Eisenbahn- 
gesellschaft.4*2 

1904:  In  founding  the  Deutsche  Kolonial-Eisenbahnbau- 
und  Betriebsgesellschaft  (German  Colonial  Railroad  Con- 
structing and  Operating  Company)  for  the  execution  of 
railroad  and  port  constructions  in  the  German  colonial 
possessions. 

Since  April,  1905,  it  has  been  operating  under  a  lease 
contract  the  Usambara  railroad  in  German  East  Africa. 
In  conjunction  with  the  firm  Lenz  &  Co.  it  has  contracted 
with  the  Imperial  Government  for  the  construction  of  the 
railroad  Luderitzbucht-  Kubub . 

The  Berliner  Handelsgesellschaft  took  a  prominent  part 
in  the  underwriting  of  all  Russian,  Chinese,  and  Japanese 
loans  emitted  in  Germany  during  the  second  period.  It 
also  emitted  several  Servian  state  and  railroad  loans. 
(For  particulars  see  Append.  V  and  VI.) 

(6)   PARTICIPATIONS  OF  THE  A.  SCHAAFFHAUSEN'SCHER 
BANKVEREIN. 

Although  the  main  strength  of  this  institution  from  the 
start  has  been  due  to  the  promotion  of  domestic  rather 

452 


The     German     Great    Banks 

than  foreign  business,  it  participated  also  in  the  founding 
of  the  following  concerns  engaged  in  the  foreign  field: 

(a)  1889:  Deutsch-Asiatische  Bank.     (See  below,  p.  455, 
No.  i.) 

(b)  1894:  Banca  Commerciale  Italiana  in  Milan.     (See 
below,  p.  456,  No.  2.) 

(c)  1898-1904  and  1908:  A  number  of  telegraph  com- 
panies and  cable  works.     (See  pp.  458  and  459,  No.  6.) 

(d)  1898:  Banque  Internationale  de  Bruxelles. 

(e)  1899:  Shantung    Mining    and    Shantung    Railway 
Companies.     (See  below,  pp.  458  and  459,  No.  6) 

(/)  I9°5:  Deutsche  Orient-Bank  in  Berlin,  jointly  with 
the  Dresdner  Bank  (see  above  sub.  3,  g)  and  the  National- 
bank  fur  Deutschland. 

(g)  1905:  Deutsch-Sudamerikanische  Bank,  stock  com- 
pany, in  Berlin,  jointly  with  the  Dresdner  Bank.  (See 
above  sub.  3,  h.) 

(h)  1906:  Kamerun  Railway  Company,  jointly  with 
several  other  banks.  (See  below,  p.  458,  No.  5.) 

(7)  PARTICIPATIONS  OF  THE  NATIONALBANK  FUR  DEUTSCH- 

IvAND. 

This  bank  took  part  in  the  founding  of  the  following 
institutions : 

(a)  1889:  Deutsch-Asiatische  Bank.     (See  below,  p.  455, 
No.  i.) 

(b)  1895:  Credito  Italiano  in  Rome.     The  present  share 
capital  of  the  institution  is  75,000,000  lire  ($14,475,000); 
its  branches  number  at  present  17. 


453 


National    Monetary     Commission 

(c)  1899:  Shantung    Mining    and    Shantung    Railway 
companies.     (See  below,  pp.  458  and  459,  No.  6.) 

(d)  1904:  Banque  d' Orient,  established  by  it  in  Athens. 
(Share  capital,  10,000,000  francs;  branches  in  Saloniki  and 
Smyrna.) 

(e)  1905:  Deutsche  Orientbank,  stock  company,  in  Ber- 
lin, founded  in  conjunction  with  the  Dresdner  Bank  (see 
above,  sub.  3,  g)  and  the  A.  Schaaffhausen'scher  Bankve- 
rein.     This  bank  was  detached  from  the  Banque  d' Orient 
and  took  over  the  latter's  branches  in  Berlin,  Hamburg, 
and    Constantinople.     Additional    branches    have    been 
opened  since  in  Cairo,   Alexandria,   Brussa,   Kalamata, 
Saloniki,  Smyrna,  Tangier,  and  Casablanca. 

Since  1905  the  Deutsche  Orientbank  has  maintained  a 
community  of  interest  with  the  Deutsche  Paldstina-Bank 
in  Berlin,  founded  in  1899  by  the  banking  firm  Von  der 
Heydt  &  Co.,  for  the  promotion  of  trade  with  Palestine 
and  the  Levant.  The  latter  bank  took  over  the  assets 
and  liabilities  of  the  Deutsche  Paldstina  und  Orient-Gesell- 
schaft  (Limited)  in  Jerusalem,  with  a  capital  of  5,000,000 
marks.  It  has  now  4  branches  (in  Jaffa,  Jerusalem, 
Beirut,  and  Hamburg) ,  and  in  turn  founded  a  subsidiary 
company,  the  Levante-Kontor  (Limited) ,  with  a  branch  in 
Constantinople.  The  dividends  on  its  preferred  stock 
show  the  following  rates : 


1800 

Per  cent, 
o 

IQO4 

Per  cent, 
O 

IQO^i 

c 

IQOI 

c 

1  906  '. 

6 

IQO2 

A 

IQO7 

6 

IQOI.  . 

0 

1008.  . 

6 

454 


The     German     Great    Banks 

(/)  1909:  The  bank  took  part  in  the  increase  of  capital 
of  the  Credit  Mobilier  Francais. 

III. — THE  COMMON  SUBSIDIARY  COMPANIES  (Tochter- 
Gesellschaften)  OF  THE  GERMAN  CREDIT  BANKS  FOR 
THE  PROMOTION  OF  OVER-SEA  AND  FOREIGN  BUSINESS. 

The  following  subsidiary  institutions  were  founded 
jointly  by  a  large  number  of  German  banks  and  banking 
houses  to  assist  German  trade  and  industry  in  gaining 
new  markets  and  to  preserve  and  expand  existing  markets 
or  to  develop  our  colonies. 

i.  In  1889  there  was  founded  for  the  promotion  of 
our  trade  in  eastern  Asia  the  Deutsch-Asiatische  Bank"3 
at  Shanghai,  which  at  the  end  of  1908  had  twelve  branches 
in  Berlin,  Hamburg,  Tientsin,  Tsingtau,  Hankow,  Hong- 
kong, Calcutta,  Tsinanfu,  Peking,  Yokohama,  Kobe 
in  Japan,  and  Singapore.  The  share  capital  amounts 
to  7,500,000  Shanghai  taels,  fully  paid  in.  The  follow- 
ing great  banks  participated  in  its  founding :  The  Deutsche 
Bank,  Disconto-Gesellschaft,  Dresdner  Bank,  Darm- 
stadt er  Bank,  Berliner  Handelsgesellschaft,  A.  Schaaffhau- 
sen'scher  Bankverein,  and  Nationalbank  fur  Deutschland. 

By  grant  (Konzessiori)  dated  July  6,  1906,  based  on  par- 
agraph 3  of  the  law  regarding  the  colonies  and  the  imperial 
decree  regarding  the  issue  of  bank  notes  in  the  colonies, 
dated  October  30,  1904,  the  Deutsch-Asiatische  Bank  was 
given  the  right  for  a  period  of  fifteen  years  to  issue  bank 
notes  in  denominations  of  i,  5,  10,  and  25  Mexican  dollars 
and  of  i,  5,  10,  and  25  taels  through  its  branch  offices 
located  in  the  German  possession  of  Kiauchau  and  in 
China.  The  dividends444  paid  were  as  follows: 


455 


National    Monetary     Commission 


1880 

Per  cent. 
O 

1809.. 

Per  cent. 
6 

1890 

2  V2 

IQOO 

7 

1891 

o 

IQOI 

7 

1802 

o 

IQO2  .  . 

9 

180-1 

c 

IQOV  . 

IO 

l8QA 

7 

I  QO4-  . 

.     .          IO 

1  8CK 

8 

IQO^ 

II 

1806 

10 

IQO6 

q 

1807 

6 

IQO7 

8 

1808  .  . 

.    10 

1908.  . 

sy2 

2.  In  1894,  for  the  promotion  of  our  trade  with  Italy, 
there  was  founded  the  Banca  Commerciale  Italiana**5 
in  Milan.  Among  the  participants  there  were  the  same 
great  banks,  except  the  Nationalbank  fur  Deutschland, 
which  was  interested  in  the  Credito  Italiano.  The  capi- 
tal of  the  Banca  Commerciale  Italiana  at  the  end  of 
1908  was  108,000,000  lire.  It  has  now  35  branches, 
among  them  one  recently  opened  at  Constantinople. 

The  dividends  paid  were  as  follows: 


Per  cent. 

IQO2 

Per  cent. 
8 

1896                         6^ 

IQO^ 

8 

1807                         7 

IQOA 

8 

1898                          7;^2 

1800                    .  8^< 

1006  .  . 

.  Q 

IQO7 

IQOI  .                         .  8 

IQ08  .  . 

.  0 

For  the  promotion  of  trade  with  Tunisia  the  Banca 
Commerciale  Italiana  in  turn  founded  in  1907  the  Banca 
Commerciale  Tunisina  with  the  head  office  at  Paris. 
During  the  same  year  it  also  participated  in  the  increase 
of  capital  of  the  Banco  Commerciale  Italiano  in  Sao  Paulo, 
Brazil,  whose  firm  name  has  been  changed  since  to  the 
Banco  Commerciale  Italo-Brasiliano  (capital  5,000  contos). 
In  1908  it  founded  in  Constantinople  the  Societd  Commer- 


456 


The     German     Great    Banks 

dale  per  I'Oriente  (share  capital,  3,000,000  lire)  for  the 
promotion  of  trade  between  Italy  and  Turkey. 

3.  During   1904-5   the  Deutsch-Ostafrikanische  Bank"* 
was  founded  with  the  head  office  at  Berlin,  a  nominal 
capital  of   2,000,000  marks   and  branches   at   Zanzibar, 
Mombassa  and  Dar-es-Salam.     This  institution  acts  both 
as  an  ordinary  and  a  central  note  bank  for  the  German 
colony   of   East  Africa.447     In   its   latter   capacity  it   is 
to  regulate  the  money  market,  to    facilitate   payments 
within  the  colony  and  to  make  remittances  between  the 
colony  on  the  one  hand  and  Germany  and  other  countries 

on  the  other.     It  has  also  been  granted  the  privilege  of 

0 

issuing  bank  notes  in  terms  of  rupees  in  accordance  with 
business  demand  up  to  the  threefold  amount  of  its  capital 
with  minute  provisions  regarding  the  reserve  for  its  note 
circulation.448  Among  the  institutions  participating 
in  its  foundation  there  figured  also  the  Deutsch-Ost- 
afrikanische Handelsgesellschaft  (German  East  African 
Trading  Company)  which  had  been  organized  in  the  same 
colony  likewise  with  the  cooperation  of  German  banks. 
Among  the  great  banks  which  took  part  in  the  founda- 
tion of  the  East-African  Bank  we  find  the  Deutsche  Bank 
and  the  Disconto-Gesellschaft. 

4.  During  1904-5  the  Deutsch-Westafrikanische  Bank"9 
was    formed,    a    colonial    company    with    a    capital    of 
1,000,000  marks  and  its  main  office  at  Berlin.     At  the 
end  of  1908  it  had  three  branches  (in  Hamburg,  Lome  in 
Togo,  and  Duala  in  Kamerun).     Its  function  is  to  act  as  a 
bank  in  the  colonies  of  Togo  and  Kamerun,  i.  e.,  to  regu- 
late the  money  market  and  to  facilitate  payments  in  these 
colonies ;  also  to  facilitate  remittances  between  these  colo- 


457 


National    Monetary     Commission 

nies  on  the  one  hand  and  Germany  and  foreign  countries  on 
the  other.  The  Deutsch-Westafrikanische  Bank  does  not 
possess,  however,  the  privilege  of  note  issue.  45°  It  may 
be  noted  that  the  participants  in  its  foundation  include 
besides  the  Dresdner  Bank  and  several  commercial  firms, 
also  the  Deutsch-Westafrikanische  Handelsgesellschaft  (Ger- 
man West  African  Trading  Company)  which  operates  in 
the  same  colony. 

5.  The  year  1906  witnessed  the  foundation  of  the  Kam- 
erun  Railroad  Company  for  the  construction  of  a  railway 
from  Duala  to  the  Manenguba  Mountains  with  a  capital  of 
5,640,000  marks  preferred  and  11,000,000  marks  common 
stock.     In  accordance  with  act  of  May  4,  1906,  the  Ger- 
man Imperial  Government  guarantees  a  3  per  cent  yearly 
dividend  on  the  common  stock,  besides  the  redemption  of 
the  capital  at  the  rate  of   120  per  cent.     (Reichsgesetz- 
blatt,  1906,  p.  525.)     Of  the  great  banks  the  following  took 
part  in  the  foundation  of  the  company :  Berliner  Handels- 
gesellschaft,   Darmstadter    Bank,    Disconto-Gesellschaft, 
Nationalbank  fur  Deutschland,  Norddeutsche  Bank  and 
the    A.    Schaaffhausen'scher    Bankverein.      Among    the 
founders   figure  also  the  banking  firms  S.   Bleichroder, 
von  der  Heydt  &  Co.  in  Berlin,  Wilh.  Schlutow  in  Stettin, 
M.  M.  Warburg  &  Co.  in  Hamburg,  also  the  commercial 
firm   C.  Woermann    in    Hamburg,  and  the  Aktiengesell- 
schaft  filr  Verkehrswesen  (Stock  Company  for  transporta- 
tion enterprises). 

6.  Again  in  the  interests  of  national  policy  all  the  banks 
and  firms  concerned  in  the  foundation  of  the  Deutsch- 
Asiatische  Bank  took  part  also  in  the  launching  of  the 
following  enterprises.     In  all  these  cases  there  could  be 


458 


The     German     Great    Banks 

no  thought  of  the  speedy  realization  of  the  capital  tied  up  in 
these  enterprises. 

1898:  Land-und  Seekabelwerke  A.  G.  (Stock  Com- 
pany for  land  and  sea  cable  works)  in  Cologne  -  Nippes 
(share  capital  6,000,000  marks). 

1 899 :  Schantung-Bergbau-Gesellschaft  (Shantung  Mining 
Company)  in  Berlin,  with  a  share  capital  of  6,000,000  marks. 

1899:  Schantung-Eisenbahn-Gesellschaft  (Shantung  Rail- 
way Company)  in  Berlin,  with  a  share  capital  of  54,000,000 
marks. 

1899:  Deutsch-Atlantische  Telegraphen-Gesellschaft,  Stock 
Company  in  Cologne,  with  a  share  capital  of  24,000,000 
marks. 

1899:  Norddeutsche  Seekabelwerke  (North  German  Sea 
cable  works) ,  stock  company  in  Cologne-Nordenham,  with 
a  share  capital  of  6,000,000  marks. 

1 899 :  Osteuropdische  Telegraphen  -  Gesellschaft  (East- 
European  Telegraph  Company) ,  stock  company  in  Berlin, 
with  a  share  capital  of  i  ,000,000  marks. 

1904:  Deutsch-Niederldndische  Telegraphen-Gesellschaft 
(German-Dutch  Telegraph  Company),  stock  company  in 
Cologne,  with  a  capital  composed  of  7,000,000  marks  of 
stock  and  7,250,000  marks  of  bonds. 

1908:  Deutsch-Sudamerikanische  Telegraphen-Gesellschaft 
A.  G.  (German-South  American  Telegraph  Stock  Com- 
pany), in  Berlin,  with  a  capital  composed  of  4,000,000 
marks  of  stock  and  7,800,000  marks  of  bonds. 

1907:  A  number  of  German  banks  participated  in  the 
establishment  of  the  State  Bank  of  Morocco. 

At  the  end  of  the  nineties  there  were  in  existence  only 
4  German  over-sea  banks.  In  1903  their  number  was  6, 
with  32  branches,  while  at  the  beginning  of  1906  there  were 

459 


National    Monetary     Commission 


as  many  as   13,  possessing  a  combined  capital  of  fully 
100,000,000  marks  and  about  70  branches. 

But  even  these  achievements  appear  rather  unimportant 
when  compared  with  those  of  other  countries  in  the  same 
field.  Thus,  for  instance,  England,  in  1904,  had  32  colo- 
nial banks  with  head  offices  in  London  and  2,104  in  the 
colonies,  besides  18  (30  in  1907)  other  British  foreign 
banks  with  175  branches.451  France  in  1904-5  had  18 
colonial  and  foreign  banks  with  104  agencies;  Holland  16 
over-sea  banks  with  68  branches. 

SECTION  5.  GENERAL  FINANCIAL  RESULTS  OF  THE 
GERMAN  CREDIT  BANKS;  GROSS  EARNINGS  AND  THEIR 
COMPOSITION;  GENERAL  EXPENSES;  NET  PROFITS, 
DIVIDENDS,  WRITING  OFF,  AND  RESERVES. 

The  financial  results  of  all  German  credit  banks  (with  a 
share  capital  of  at  least  1,000,000  marks)  for  the  years 
1885  to  1908,  inclusive,  their  number,  and  the  dividends 
paid  by  them,  are  summed  up  in  the  following  table : 452 


Year. 

Number 
of  banks. 

Gross  earn- 
ings, in 
thousands 
of  marks. 

Net  earn- 
ings, in 
thousands 
of  marks. 

Dividends. 

Amount  of, 
in  thou- 
sands of 
marks. 

Rate  of 
(per  cent). 

1885  

7i 
7i 
7i 
7i 
93 
92 
95 
94 
93 
96 
94 

Q8 

77,8io 
78,690 
80,  970 
no,  480 
141,  ooo 
141,  040 

112,  ISO 

III,  930 
no,  030 

112,  29O 
150-330 
I<8.  Q70 

56,  140 
57,i8o 
57,  740 
75.390 
no,  500 
98,300 
74,  140 
76,850 
71,  770 
85,  no 
in,  920 
1  18.  3  so 

46,430 
47,170 
48,  ooo 

58,970 

81,  920 
79,630 
63,  070 
61,  230 
59.740 
68,620 
83,550 

02.  600 

6.41 
6.43 
6-53 
7-  79 
8.77 
7.60 
6.  ii 
5-80 
5-72 
6.  49 
7.61 
7.66 

1886  
1887 

1888  

1889  
1890  .... 

1891  
1892  

1893  
1894 

1895  

1896.  . 

460 


The     German     Great    Banks 


Year. 

Number 
of  banks. 

Gross  earn- 
ings, in 
thousands 
of  marks. 

Net  earn- 
ings, in 
thousands 
of  marks. 

Dividends. 

Amount  of, 
in  thou- 
sands of 
marks. 

Rate  of 
(per  cent). 

1897  

102 

1  08 
116 
118 
125 

122 
124 
12) 
137 

143 
158 
169 

179,370 
218,380 
261,  170 
262,  020 
258,  400 
256,  760 

253,  210 
273,500 
330,  200 
377,080 
382,  280 
417,  230 

134,690 
162,  800 
195,470 
185,  270 
152,  640 
156,  170 
170,  560 
189,  780 
224,  730 
255,530 
255.380 
261,010 

101,  830 
126,360 
148,  560 
140,  520 
no,  520 
120,  510 
130,880 
145,540 
168,  540 
186,880 
190,  720 
194,  820 

7-63 
7.86 

8.  12 

7.19 
5-66 
6.  19 
6.  59 
7-25 
7-75 
7.88 
7-45 
7-  41 

!898  

1899  

1901    
1902   

1904  
1905  

1906 

1907  
1908  

It  may  be  seen  from  this  table  that  the  German  credit 
banks  have  paid  an  annual  dividend  below  6  per  cent  only 
three  times  during  the  last  twenty-four  years,  namely, 
for  the  years  of  depression,  1892  and  1893,  when  the 
rate  went  down  to  5.80  and  5.72  per  cent  and  for  the 
crisis  year  1901,  when  the  rate  was  as  low  as  5.66  per 
cent.  Even  for  the  years  1902  and  1903  following  the 
crisis  the  average  dividends  exceeded  6  per  cent,  while 
for  each  of  the  last  five  years  the  average  has  been  in 
excess  of  7  per  cent.  During  the  years  of  the  high  crest 
of  business  activity,  1889  and  1899,  average  dividends 
in  excess  of  8  per  cent  were  paid,  viz,  8.77  and  8.12  per 
cent.  These  are  exceedingly  satisfactory  and  moreover 
stable  results. 

It  is  further  seen  that  the  average  1907  dividends  of 
7.45  per  cent  show  a  decline  since  1906,  when  the  average 
was  7.88  per  cent,  notwithstanding  the  fact  that  the 
average  discount  rate  of  the  Reichsbank  in  1907  stood 
at  6.03  per  cent,  as  against  only  5.15  per  cent  for  the 


46i 


National    Monetary     Commission 


preceding  year.  This  may  serve  as  an  additional  argu- 
ment against  the  contention  that  the  banks  are  interested 
in  a  high  bank  rate.  The  truth  is  that  whatever  advan- 
tage they  may  derive  from  the  higher  interest  rates  on 
current  account,  this  advantage  is  as  a  rule  more  than 
compensated  by  the  fact  that  in  such  times  emissions 
are  either  out  of  question  or  else  made  quite  difficult; 
that  in  addition  the  security  business  is  less  profitable, 
that  the  value  of  the  security  holdings  is  shrinking, 
necessitating  corresponding  amounts  to  be  written  off, 
and  that  at  such  time  losses  under  the  head  of  debit 
accounts  are  also  inevitable.  A  continuous  high  bank 
discount  rate  is  therefore  as  a  rule  not  favored  by  the 
banks. 

If  it  is  considered  that  the  operating  capital  of  a  bank 
includes  also  the  surplus  funds  and  that  therefore  in 
calculating  the  dividend  rates  the  former  must  also  be 
reckoned,  the  following  results  for  the  last  seven  years 
are  obtained,  according  to  the  Deutscher  Oekonomist: 453 

[Amounts  expressed  in  thousands  of  marks.] 


1902. 

1903. 

1904. 

1905. 

Share  capital  on  which  dividends 

i  948  476 

I     984    642 

Surplus  at  the   beginning   of   the 
year  

380,  211 

391  ,  362 

400,  372 

448,  380 

Total  of  capital  and  surplus 
(Gesamtes   eigenes    Kapi- 
tal)  

2,328,687 

2,  376,  OO4 

2,  405,  508 

2,623,695 

Dividends,  amount  of  

120,  512 

130,881 

I4S-5H 

168,536 

Rate  of  dividends  calculated  on 
the  basis  of  capital  and  surplus 
per  cent 

5   51 

6.  05 

6.  40 

Rate  of  dividends  calculated  on 
the    basis    of    capital    only 
per  cent  .  . 

6.19 

6.  59 

7-  2S 

7.  75 

462 


The     German     Great    Banks 


1906. 

1907. 

1908. 

Share  capital  on  which  dividends 

are  earned  

2,371,781 

2,559,202 

2,627,855 

Surplus   at   the    beginning   of   the 

year 

586   750 

Total  of  capital  and  surplus 

(Gesamtes    eigenes     Kapi- 

tal)  

2  ,  85  I  ,  342 

3  ,  113,613 

3  ,  214,  605 

Dividends,  amount  of  

186,884 

190,  722 

194,829 

Rate    of   dividends   calculated   on 

the  basis  of  capital  and  surplus 

per  cent 

6     12 

6  06 

Rate  of  dividends  calculated  on  the 

basis  of  capital  only.  .  .  per  cent.  . 

7.88 

7-45 

7-41 

It  appears  that  on  an  average  more  than  i  %  Per 
of  the  dividends  is  to  be  imputed  to  the  surplus  funds. 

It  is  hardly  possible  for  an  outsider  to  calculate  the 
return  to  the  banks  themselves  on  the  capital  invested, 
since  neither  the  average  amounts  of  capital  employed 
during  a  given  year  nor  the  interest  paid  by  the  banks 
are  known.  For  the  same  reason  it  is  impossible  to 
calculate  the  profits  of  the  various  business  branches  of 
the  banks.  Neither  are  the  net  returns  to  the  holders 
of  bank  shares  identical  with  the  dividends  received  by 
them,  in  case  a  premium  was  paid,  when  the  shares  were 
purchased.  For  the  period  1871  to  1900  the  average 
income  from  dividends  derived  by  shareholders  of  German 
credit  banks  amounted  to  6.74  per  cent;  for  1880—1900 
to  6.84  per  cent,  while  the  net  income  of  shareholders  for 
the  last  ten  years  was  6.70  per  cent.454 

For  the  year  1908  the  returns  on  various  shares  from 
the  shareholders'  point  of  view455 — that  is,  the  net  returns 
to  shareholders — were  as  follows: 


463 


National     Monetary     Commission 

Banking,  7.7  per  cent;  insurance,  19.3  per  cent; 
chemical  industry,  15.7  per  cent  (large-scale  chemical 
enterprises,  11.5  per  cent);  mining,  smelting,  salt  works, 
etc.,  9.5  per  cent;  textile  industries,  9.4  per  cent;  elec- 
trical industry,  8  per  cent;  secondary  railways  (Klein- 
bahneri)  and  street  railways,  4.3  per  cent. 

The  average  dividends  of  the  1 4  Berlin  banks 45e  were 
invariably  higher  than  those  of  other  banks,  as  may  be 
seen  from  the  following  table,  which  gives  the  compara- 
tive figures  for  the  last  seventeen  years: 


Year. 

Average  dividends  paid 
by- 

Year. 

Average  dividends  paid 
by  — 

All  German 
banks  with  a 
capital  of  at 
least 

Berlin 
banks. 

All  German 
banks  with  a 
capital  of  at 
least 

Berlin 
banks. 

1,000,000 

marks  each. 

1,000,000 

marks  each. 

1892 

Per  cent. 
5-8o 
5-72 
7-49 

Per  cent. 
6.03 
5-73 
8.  14 

1901  
1902  

Per  cent. 
5-66 
6.  19 
6.  59 

Per  cent. 

5-  75 
6.72 
7-  23 

1893  

1894  

1903  

1895  
1896 

7.61 
7.66 
7.63 
7.86 

8.12 

7-19 

8.29 
8.48 
8.45 
8.45 
8-59 
7.61 

1904  

7-25 
7-75 
7.88 
7-45 
7-41 

8.15 
8.72 
8.77 
7-93 
8.06 

1897  

1906  

l8q8 

1899 

1908  

1900  

We  may  reiterate  here  what  we  stated  in  the  earlier  part 
of  the  volume,  viz,  that  the  rate  of  dividends  increases 
with  the  increase  of  the  current  business  of  the  bank,  while 
the  steadiness  of  the  dividends  increases  with  the  increase 
of  its  regular  deposit  business. 

On  the  other  hand  there  is  no  basis  of  fact  for  the  notion 
of  a  recent  writer,457  according  to  which  the  profits  of  the 
bank  increase  in  proportion  to  their  combined  capital  and 


464 


Th 


e  r  m  a  n 


G 


r  e  a 


t    E 


a  n 


k 


surplus,  a  fact  which  he  regards  of  the  utmost  economic 
interest.  As  a  matter  of  fact,  the  reverse  is  true :  With 
the  progressive  growth  of  profits — that  is,  with  the  growth 
of  business,  especially  their  current  business — the  banks, 
in  accordance  with  sound  business  policy,  have  been 
increasing  their  capital. 

Of  the  total  gross  profits_ojMthe  German  banks  (with,  a_ 
capital    of   at    least    1,000,000  marks  each)   almost  one- 


quarter  is  due  to  commissions  earned  chiefly  in  the  broker- 
age business.  According  to  the  Deutscher  Okonomist  the 
gross  profits,  commissions,  and  the  proportion  of  com- 
missions to  gross  profits  show  the  following  figures: 


1884 71 

1885 71 

1886 71 

1887 71 

1888 71 

1889 93 

1890 92 

1891 95 

1892 94 

1893 93 

1894 96 

1895 97 

1896 98 

1897 102 

1898 108 

1899 116 

1900 118 

1901 125 

1902 122 

1903 124 

1904 129 

1905 137 

1906 143 

1907 158 

1908 169 


Number 
of  banks. 


Gross  profits 

(1,000 

marks). 


83 , ooo 

77,800 

78, 700 

80, 900 

no,  050 

141, ooo 

141 , ooo 

112, OOO 

III, 900 

no,  ooo 

112, 200 

150,300 
158,900 
179,400 
218, 400 
261, 800 
262, ooo 
258, 400 
256, 700 

253, 200 

273.500 

330, 200 

377,000 
382, 300 

417, 200 


Commissions 
(1,000 
marks). 


19, 900 
19, 700 
20, 500 

20, 700 

24, 200 

32, too 

32, 200 
28,800 
26, 700 
27,800 

28, 100 

34.300 

35.400 
40, 400 
50, 500 
57.900 
60, ooo 
58,800 

57.700 
62, 600 
68. 200 
81,400 
91,400 
97. SOD 
103, 700 


Proportion 
of  commis- 
sions to 
gross  profits. 


Per  cent. 


24.0 
25-3 
26.  o 
25-5 

22.  O 
22.8 
22.8 
25-7 
23-8 
25-2 
25-0 
22.8 
22.3 
22.5 
23-  I 
22.  I 
22.9 
22.8 
22.5 

24.  7 

25.0 
24.7 
24.3 
25-5 
24.9 


90311"— II- 


-31 


465 


X 


s 


National    Monetary     Commission 

The  gross  profits  of  the  Berlin  banks  show  the  following 
figures  (in  million  marks) : 


1897 98-8 

1898 126.8 

1899 144-5 

19°° 139-9 

1901 131-6 

1902 138.  2 


i9°3 140-  4 

1904 152.  6 

1905 190.  7 

1906 201.9 

1907 201.  3 

1908  458 196.0 


According  to  a  calculation  of  the  Kolnische  Zeitung 459  the 
total  gross  profits  of  57  German  banks  in  1903  originated 
as  follows:  From  bills  and  interest,  48  per  cent;  from 
commissions,  25  per  cent;  from  issues  and  participations, 
22  per  cent. 

For  the  years  1905-1908  the  profits  from  commissions 
and  interest  constituted  the  following  proportions  of  the 
total  gross  profits:  (a)  for  all  banks:  71  per  cent,  75  per 
cent,  86  per  cent,  and  76  per  cent;  (6)  for  9  Berlin  banks: 
67  per  cent,  71  per  cent,  and  78  per  cent. 

Of  the  gross  profits  of  the  Berlin  great  banks  the  follow- 
ing proportions  were  derived  from  commissions  and 
interest: 


1906. 

1907. 

t9o8.«» 

Deutsche  Bank  
Disconto-Gesellschaft  

Per  cent. 
69 
64 

Per  cent. 
73 
68 

Per  cent. 
70.  6 
61.4 

Dresdner  Bank  .     .  . 

79 

88 

84  8 

Darmstadter  Bank  
Berliner  Handelsgesellschaft 

55 

69 

66.6 
82   9 

A.  Schaaffhausen'scher  Bankverein  

77 

88 

84.4 

The  assertion  has  been  made  that  as  early  as  1894  all  the 
banks  except  the  Darmstadter  Bank,  and  in  1905  all  the 
banks,  except  the  Disconto-Gesellschaft  and  the  Darm- 
stadter Bank  derived  sufficient  earnings  from  their  current 


466 


The     German     Great    Banks 

business,  that  is,  the  specie,  coupon,  and  bill  business, 
interest  and  commissions,  also  from  their  commandites,  to 
fully  pay  their  dividends.  This  assertion  made  by  I^oeb 
(see  Model-I/)eb  op.  cit.  p.  152)  is  erroneous,  as  the  author 
fails  to  deduct  from  the  above  earnings  the  corresponding 
expenses  of  operation.  These  expenses461  for  all  German 
credit  banks  with  a  capital  of  at  least  1,000,000  marks 
each  were  as  follows  (in  million  marks) : 


Year. 

Million 
marks. 

Year. 

Million 

marks. 

Year. 

Million 
marks. 

1883  

12.4 

1893  

26   9 

66   <; 

1884  

13  .  5 

1894  

26.  2 

I9O3    

1885  

1895 

1886  

14.  8 

1896  

32   8 

90  8 

1887  

15.  6 

1897  

37.0 

I9O6   .     . 

1888  . 

1898 

45   8 

1890  
1891 

22.8 

1899  

53-3 

rQ     8 

1908  

134.5 

1892  

24.  o 

1901  

64.2 

It  is  seen  that  during  the  course  of  concentration  the 
cost  of  operation  has  been  steadily  and  largely  increasing. 
In  1908  it  constituted  about  32  per  cent  of  the  gross  earn- 
ings of  all  the  larger  banks,  compared  with  31  per  cent  in 
1907,  28  per  cent  in  1906,  27  per  cent  in  1905  and  only  18 
per  cent  in  1895.  For  the  9  Berlin  banks  the  cost  of 
operation  in  1908  amounted  to  not  less  than  66,800,000 
marks,  as  against  gross  earnings  of  196,000,000  marks,  that 
is,  34  per  cent,  as  against  32  per  cent  in  1907,  30  per  cent 
in  1906,  and  28  per  cent  in  1905,  the  individual  banks 
showing  proportions  more  or  less  favorable  than  the 
averages  just  given. 

For  the  6  Berlin  great  banks  the  cost  of  operation  for 
1908  was  55,900,000  marks;  that  is,  33  per  cent  of  the 


467 


National     Monetary     Commission 

gross  earnings,  the  figures  for  each  of  these  banks  being  as 
follows  (in  million  marks) : 


1907. 

1908. 

Gross 
earnings. 

Cost  of 
operation. 

Gross 
earnings. 

Cost  of 
operation. 

Deutsche  Bank  .  . 

53-6 

27.8 
31-5 
17.8 
14.  o 
18.0 

20.  0 

8.5 
9-8 
7-6 

2-  5 

3-4 

55-0 
29.  o 
31-0 
19-3 
14-7 
I8.3 

21.4 
8.9 
10.  5 

8.2 

3-9 
3-0 

Disconto-Gesellschaf  t  

Darmstadter  Bank  
Berliner  Handelsgesellschaf  t  
A.  Schaaffhausen'scher  Bankverein  .... 

The  most  noteworthy  facts  brought  out  by  the  table  is 
the  relatively  small  cost  of  operation  in  the  case  of  the 
Berliner  Handelsgesellschaft,  due  to  its  continued  strong 
centralization,  and  the  relatively  high  cost  of  operation  in 
the  case  of  the  Deutsche  Bank,  due  undoubtedly  to  its 
strong  decentralization. 

The  amounts  written  off  by  all  German  credit  banks 
(with  a  capital  of  at  least  i  ,000,000  marks  each)  prior  to  the 
fixing  of  the  clear  profits  were  as  follows  (in  million  marks) : 


Year. 

Million 
marks 

Year. 

Million 
marks. 

Year. 

Million 
marks. 

1883 

1892 

8.  2 

1901  

Si  6 

1884 

3  7 

1893  

IO.  O 

1902  

24.  o 

1885 

6  6 

1894 

8  3 

1886  
1887 

4-7 

1895  
1896 

9.0 

1904  

II.  0 

1888 

8  2 

1897 

2  5 

1906  

12.  O 

5  4 

1898  

5.8 

1907  <62  

4O.  2 

1890  
1891 

6.7 
8  9 

1899  
1  900  

10.  7 

12.8 

1908  

35-  i 

This  table  does  not  include  the  amounts  written  off 
prior  to  the  fixing  the  gross  earnings  by  reducing  the  valua- 


468 


The     German     Great    Banks 

tion  of  particular  assets  (so-called  silent  reserves).  The 
specially  large  amounts  written  off  in  1901,  viz,  51,600,000 
marks,  are  due  to  the  crisis  of  1900-1901. 

According  to  the  Deutscher  Oekonomist,  the  surplus 
funds  showed  the  following  total  amounts  and  proportions 
to  the  share  capital: 


Data  for  all  banks. 

Data  for  the  Berlin  banks. 

Year. 

Capital 
stock  (in 
thousands 
of  marks.) 

Surplus  (in 
thousands 
of  marks.) 

Propor- 
tion of 
surplus  to 
capital 
stock. 

Capital 
stock  (in 
thousands 
of  marks.) 

Surplus  (in 
thousands 
of  marks.) 

Propor- 
tion of 
surplus  to 
capital 
stock. 

Per  cent. 

Per  cent. 

1885  

723,950 

93,  240 

12.  90 

326,  740 

55,o8o 

17.00 

1886 

733  ,  690 

99,  270 

13.  53 

332,  750 

CO     C2Q 

18.  oo 

1887  

758,  ooo 

107,  900 

14.  23 

351,75° 

Oy  »  J  *** 

67,  140 

19.  oo 

1888  

772,  400 

i  15,  320 

15.  oo 

368,  180 

74,  030 

22.11 

1889 

98  I  ,  450 

156  ,  060 

15.  90 

473  ,  I  20 

103   820 

1890  

,054,330 

187,880 

17.82 

507,450 

119,  650 

23.58 

1891  

,  053,  210 

191,  720 

18.20 

481,  240 

117,910 

24.  50 

1892 

05  7  ,  090 

200,  310 

18.  95 

AQA     "?QO 

I  23       I  8O 

n  A      <\? 

1893  

,  046,  170 

196,330 

18.77 

*ty*tt  oyu 

486,  400 

117.560 

•^4  •  y  * 

24.  17 

1894  

,  067,  520 

199,  820 

18.  72 

534,200 

120,  49O 

22.  56 

1895  

,  134,  820 

210,  620 

18.56 

626,860 

142,  460 

22.  73 

1896  

,  240,310 

235,  250 

19.  oo 

656,570 

153,040 

23-32 

1897  

,  418,  090 

270,  750 

19.  10 

758,o8o 

172,320 

22.  73 

1898  

,  688,  170 

33°,  37o 

19.  60 

926,  530 

2O2  ,  860 

2  1  .  9O 

1899  

,906,  250 

373,930 

19.61 

,  019,  920 

225,540 

22.  II 

1900  

,959,550 

390,930 

19.95 

,  019,  920 

230,  680 

22.  62 

1901  

,959,  290 

380,  210 

19.40 

,  015,  800 

223,730 

22.  13 

1902  

,980,  590 

391,300 

19-  75 

,  022,  800 

239,890 

23-45 

1903  

,  989,  960 

4OO,  37O 

2O.  12 

,  OI9  ,  4OO 

243   3  10 

23-  87 

1904  

,066,  540 

448,380 

21.68 

,  O?!,  200 

278,950 

26.  04 

1905  

,  223,580 

479,500 

21.  50 

,  136,  700 

294,  ioo 

25.80 

1906  

,432,  140 

554,410 

22.  70 

,175,440 

333,  750 

28.30 

1907 

,572,  890 

^86    7^0 

22.  80 

209   100 

344    8  50 

28   *?o 

1908  

,  646,  610 

O  ou  t    /  O^ 

607,  070 

22.  9O 

,178,  ooo 

342,890 

29.  10 

A  very  material  part  of  the  surplus  funds  does  not  come 
from  the  business  profits,  but  represents  chiefly  amounts 
paid  in  by  the  stockholders  in  the  shape  of  premiums  and 


469 


National    Monetary     Commissio 


n 


placed  with  the  surplus  funds  in  accordance  with  the  pro- 
visions of  paragraph  262  of  the  Commercial  Code  (formerly 
article  185,  b,  sees,  i  and  2  of  the  Aktiennovelle  (corpora- 
tion share  act)  of  July  18,  1884.  The  surplus  funds  grew 
according  to  the  above  table  in  the  case  of  all  banks  with 
a  capital  of  at  least  1,000,000  marks  each  from  12.90  per 
cent  in  1885  to  22.90  per  cent  in  1908,  and  in  the  case  of 
the  Berlin  banks  from  17  per  cent  in  1885  to  29.10  per  cent 
in  1908.  On  an  average,  the  surplus  funds  grew  more 
rapidly  than  the  capital  stock. 

During  the  year  1900,  when  the  surplus  funds  in  all  the 
banks  amounted  to  nearly  20  per  cent  (19.95)  and  in  the 
Berlin  banks  to  nearly  23  per  cent  (22.62),  the  surplus 
funds  in  other  enterprises  (according  to  Ed.  Wagon, 
op.  cit.,  p.  170)  were: 

Per  cent. 

In  the  wood  industry 8.  89 

In  building  companies 10.  87 

In  the  brewery  industry 1 7.  07 

In  the  coal  industry 20.  48 

In  the  machinery  industry 22.  94 

In  the  chemical  industry 23.  38 

In  the  rubber  industry 27.15 

In  the  paper  industry 27.  16 

I  must  say,  however,  that  this  very  favorable  develop- 
ment of  the  surplus  funds  of  the  banks  is  due  to  the  excel- 
lence of  our  corporation  laws  rather  than  to  the  excellent 
policy  of  our  banks,  as  Ed.  Wagon  would  have  us 
believe. 463 

At  all  events  it  is  due  chiefly  to  the  relatively  large 
surplus  funds  that  the  German  banks  and  industrial  com- 
panies were  able  to  pass  through  the  crisis  of  1 900  relatively 
well,  in  strong  contrast  to  the  crisis  of  1873,  and  that  their 
recovery  after  the  crisis  took  so  little  time.  It  is  seen  that 

470 


The     German     Great    Banks 

the  surplus  funds  of  the  German  banks  compare  quite 
favorably  with  the  surplus  funds  accumulated  in  the  most 
important  branches  of  industry.  It  must,  however,  be 
borne  in  mind,  that,  like  the  industrial  corporations,  our 
banks  have  endeavored  to  accumulate  so-called  "  silent 
reserves"  in  addition  to  the  legally  prescribed  surplus 
funds  as  shown  in  the  balance  sheets.  These  "silent 
reserves"  can  be  traced  chiefly  to  the  extremely  cautious 
and  conservative  modes  of  valuing  the  assets  of  the 
institutions  before  the  gross  earnings  are  calculated. 

The  fairly  steady  progress  of  the  former  period  (1848- 
1870)  contrasts  with  the  rapidity  with  which  Germany's 
whole  economic  life  and,  with  it,  German  banking  are 
advancing  in  the  present  period,  in  about  the  same  way 
as  the  speed  of  the  mail  coach  of  the  times  of  the  Holy 
Roman  Empire  of  the  German  nation,  contrasts  with  the 
flight  of  the  modern  automobile,  which  while  it  speeds 
along,  overcoming  all  obstacles,  corners,  and  surface 
difficulties,  endangers  at  times  both  the  innocent  pedes- 
trian as  well  as  the  occupants.  Just  as  in  the  case  of 
the  automobile,  so  in  the  case  of  German  banks,  public 
safety  and  real  progress  are  safeguarded  only  when  the 
persons  in  charge  combine  great  technical  skill  with  the 
greatest  virtue  of  persons  in  control,  that  of  keeping 
within  bounds. 

Not  only  private  but  also  public  interests  are  at  staKe. 
With  the  power  and  the  influence  of  the  large  enterprises 
grows  also  the  responsibility  of  the  managers,  as  well 
as  the  necessity  of  supplanting  the  indiscriminate 
choice  of  means  by  wise  self-restraint  of  the  leaders. 
It  is  not  without  significance  that  a  distinction  is  made 


471 


National     Monetary     Commission 

between  banks  proper  and  private  banking  concerns,  and 
that  the  bank  employees  are  spoken  of  as  bank  officials. 
They  are,  in  fact,  employees  of  enterprises  which  by 
reason  of  their  functions  and  development  "can  not  be 
regarded  as  purely  private  undertakings"464  and  toward 
which  the  regulations  of  private  law  are  becoming  less 
and  less  applicable. 

SECTION  6.  THE  CHARACTER  OF  THE  BUSINESS  MAN- 
AGEMENT AND  BUSINESS  DEVELOPMENT  OF  EACH  OF 
THE  GREAT  BERLIN  BANKS. 

Before  describing  in  the  next  chapter  the  concentration 
movement  in  German  banking  during  the  second  period, 
I  shall  attempt  to  characterize  summarily  the  particular 
methods  of  management  and  operations  of  each  of  the 
great  Berlin  banks,  as  shown  in  previous  chapters,  in 
connection  with  their  various  activities. 

THE   DEUTSCHE   BANK. 

i .  The  distinct  merit  of  the  management  of  the  Deutsche 
Bank,  which  was  founded  only  in  the  beginning  of  the 
second  period,  is  that  from  its  very  inception  is  showed  a 
clear  insight  both  into  the  needs  of  the  hour  as  well  as 
of  the  more  distant  future.  Accordingly  its  policy  has 
been  to  make  timely  and  proper  provisions  for  these  more 
distant  needs,  so  that  the  bank  was  hardly  ever  taken 
unawares  by  unexpected  happenings  and  in  its  actions 
and  policies  was  almost  never  influenced  by  untoward 
developments.  The  bank  was  thus  never  compelled  to 
make  sudden  changes  in  its  policy,  dictated  by  the  pressing 
needs  of  the  moment,  and  in  all  its  activities  presents  a 
picture  of  safe,  quiet,  and  steady  progress. 


472 


The     German     Great    Banks 

2.  There  are  three  main  directions  in  which  the  above- 
mentioned  qualities  of  management  are  brought  out  most 
clearly  and  brilliantly,  and  in  which  the  Deutsche  Bank 
has  become  a  model  for  German  banking  as  a  whole: 

(a)  The  Deutsche  Bank,  immediately  after  its  creation, 
adopted  as  an  integral  and  essential  feature  of  its  banking 
policy,  the  systematic  fostering  of  the  deposit  business 
through  the  establishment  of  deposit  offices,  (which  num- 
bered 74  at  the  end  of  1908),  thereby  effecting  the  con- 
centration of  a  part  of  the  available  funds  of  the  nation  in 
the  credit  banks  for  productive  investments  and  uses. 

The  amount  of  its  deposits  increased  from  4,800,000 
marks  at  the  end  of  1871  to  74,800,000  marks  in  the  year 
1894  and  reached  the  total  of  779,500,000  marks  at  the 
close  of  1908. 

(b)  It  was  first  among  the  banks  to  recognize  the  ne- 
cessity for  the  German  credit  banks,  of  following  a  syste- 
matic industrial  policy,  and  immediately  upon  recogni- 
tion of  this  necessity  it  took  the  proper  practical  steps  in 
line  with  its  new  policy. 

In  the  year  1897  a  community  of  interests  formed 
simultaneously  with  the  Bergisch-Markische  Bank  in 
Elberfeld  and  with  the  Schlesischer  Bankverein  in  Breslau, 
both  of  which  had  long  been  active  in  the  chief  industrial 
districts  of  Rhineland- Westphalia  and  Silesia,  secured 
to  the  Deutsche  Bank,  with  one  stroke,  a  firm  foundation 
for  permanent  industrial  connections  in  these  districts. 

(c)  Although  other  banks  had  made  scattered  efforts 
along  the  same  lines,  the  Deutsche  Bank  was  the  first  to 
recognize  the  need  of  a  systematic  fostering  of  industrial 
exports  by  the  German  credit  banks  and  proceeded  to  lend 


473 


National    Monetary     Commission 

its  support  to  that  policy  with  an  energy  undaunted  either 
by  difficulties  or  occasional  failures.  Soon  after  its  crea- 
tion it  established  branches  in  Bremen,  Hamburg,  and 
London ,  followed  later  by  the  creation  of  subsidiary 
companies  in  foreign  countries  or  for  the  foreign  trade , 
such  as  the  Deutsch-Amerikanische  Treuhand-Gesellschaft, 
(1890)  the  Deutsche  Ueberseeische  Bank  (1890),  the 
Deutsch-Ostafrikanische  Bank,  (7904-5),  the  Central- 
Amerika-Bank  (1905),  and  the  Mexikanische  Bank  fur 
Handel  und  Industrie  (1906). 

The  same  and  even  larger  purposes  were  served  by  the 
founding  of  the  Anatolische  Eisenbahn-Gesellschaft  (1889), 
the  Betriebsgesellschaft  der  Orientalischen  Eisenbahnen 
(1889),  the  Bank  fur  Orientalische  Eisenbahnen  (1891),  the 
Kaiserl.  Ottomanische  Eisenbahngesellschaft  (1903),  the 
Bagdad-Bahn  (1903),  and  the  Deutsch-Ostafrikanische 
Bank  (1904-5). 

In  all  its  activities  abroad  the  Deutsche  Bank  was 
governed  by  the  viewpoint  which  I  endeavored  to  express 
in  another  part  of  this  book  (Sec.  7)  in  the  words:  "The 
skirmishes  of  the  political  advance  posts  are  fought  out 
on  financial  ground"  (Die  politischen  Vorpostengefechte 
werden  auf  finanziellem  Boden  geschlagen) .  This  is  shown 
best  by  the  bank's  activities  in  Turkey,  in  the  case  of  the 
Anatolian  and  the  Bagdad  railways,  etc. 

It  was  the  above-mentioned  lines  of  policy  which 
caused  the  Deutsche  Bank  (as  we  shall  see  in  the  next 
Part,  IV)  to  develop  a  strong  tendency  toward  con- 
centration, particularly  by  decentralizing  its  operations. 
In  this  connection  the  bank  quite  frequently  and  suc- 
cessfully availed  itself  of  opportune  moments  for  prompt 


474 


The     German     Great    Banks 

and  energetic  action,  even  at  times  when  other  banks 
preferred  to  follow  a  cautious  and  waiting  policy.  For 
instance,  on  the  same  day  when  the  business  and  bank- 
ing world  was  shocked  by  the  news  that  the  Leipziger 
Bank  had  closed  its  doors  the  Deutsche  Bank  announced 
the  opening  of  a  branch  in  Leipzig. 

The  beginnings  of  concentration  date  back  to  the 
seventies,  when  the  Deutsche  Bank  participated  in  a 
number  of  bank  liquidations,  which  will  be  discussed 
in  detail  later  on.  This  action  proved  the  source  of 
considerable  profits,  and,  what  was  more  important, 
resulted  at  the  same  time  in  the  gain  of  a  large  clientele 
of  the  first  order  in  various  sections  of  the  Empire. 
It  also  gave  the  bank  an  opportunity  to  obtain  a  firm 
foothold  in  southern  Germany  by  founding  in  Frankfort- 
on-the-Main,  one  of  the  leading  financial  centers,  a 
branch  of  its  own  on  the  ruins  of  the  Frankfurter  Bank- 
herein. 

By  constantly  extending  the  network  of  communities 
of  interest  and  by  the  conclusion  of  friendly  agreements 
(Freundschaftsvertrdge)  on  the  basis  of  the  "most- 
favored  treatment,"  it  steadily  increased  the  concentra- 
tion and  through  it  extended  its  sphere  of  activity  and 
influence.  With  each  further  phase  of  concentration  the 
bank  also  increased  the  domain  of  its  current-account, 
bill,  contango,  acceptance,  and  emission  business.  This 
can  be  seen  very  plainly  from  a  comparison  of  the 
table  below  (p.  480),  which  shows  the  earnings  from  its 
various  lines  of  business,  with  the  table  showing  the 
progress  of  concentration  (Appendix  VII).  The  bank 
recognized  from  the  very  beginning,  even  while  it  was 


475 


National    Monetary     Commissio 


n 


planning  large  activities  abroad,  that  the  fostering  of  the 
deposit  and  the  regular  business  must  always  constitute 
the  backbone  of  a  German  credit  bank,  and  it  took  no 
step  in  its  concentration  development  which  did  not 
involve  also  a  vigorous  advancement  in  this  direction. 

The  systematic  development  of  its  industrial  policy 
began  with  the  "bold  move"  of  1897.  During  the  first 
two  decades,  however,  the  bank  did  little  or  nothing 
toward  extending  its  industrial  connections  through 
the  founding  or  transforming  of  industrial  enterprises. 
At  that  time  it  sought  to  improve  these  connections  rather 
through  expanding  its  current-account  and  acceptance 
business.  When  in  1890  it  followed  the  example  of 
the  other  banks  by  founding  the  Deutsch-Oesterreichische 
M annesmannrohrenwerke  (German-Austrian  Mannesmann 
Tube  Works),  this  "step  from  its  straight  path"  did 
not  prove  profitable. 

Since  the  nineties,  however,  the  German  Bank  has 
shown  but  little  difference  from  the  other  banks  as 
regards  its  industrial,  founding,  transforming,  credit,  and 
emission  business,465  although,  generally  speaking,  it 
shows  far  less  activity  than  the  other  banks  in  the  field 
of  industrial  promotion  proper.  It  was  only  recently 
that  it  entered  upon  this  line  of  activity  on  a  large 
scale  by  financing,  with  apparent  success,  a  number  of 
petroleum  companies.  (See  above,  p.  418  and  following.) 

It  should  be  said  that  the  Deutsche  Bank  was  also  in 
advance  of  most  other  banks,  in  adhering  the  more 
strictly  to  the  principles  of  distribution  of  risk  and 
liquidity  of  resources  the  more  it  extended  its  sphere 
of  activity. 

476 


The     German     Great    Banks 

Increases  of  capital  for  the  purpose  of  restoring  the 
liquidity  of  its  resources  were  never  resorted  to  at  a  time 
when  the  liabilities  had  already  grown  to  dangerous 
proportions  as  compared  with  the  liquid  assets  of  the 
institution,  but  were  secured  beforehand,  when  such  an 
unfavorable  change  was  to  be  reasonably  expected  as  the 
natural  consequence  of  the  normal  growth  of  business. 
Such  increases  often  proved  unpleasant  surprises  to  stock- 
holders and  speculators,  causing  unjustified  apprehension 
of  decreased  earnings. 

As  a  result  of  the  mutually  interdependent  business 
policies  described  above,  the  Deutsche  Bank  has  shown  a 
greater  steadiness  in  the  development  of  its  dividends  as 
well  as  its  surplus  funds  than  any  other  bank.  This  is 
proven  by  the  table  below,  taken  from  the  report  of  its 
operations  for  1908.  Its  surplus  funds,  as  shown  in  its 
balance  sheets  (exclusive  of  the  no  doubt  considerable 
"silent  reserves"),  amount  at  present  to  51  per  cent  of 
the  capital  stock  of  200,000,000  marks,  the  latter  having 
grown  from  an  original  capital  stock  of  15,000,000  marks 
in  1870. 

With  reference  to  earnings  from  the  current  business 
and  the  extent  of  its  oversea  business,  the  Deutsche  Bank 
takes  first  rank.  Its  acceptance  account  as  a  result  of 
its  large  oversea  business  often  reached  proportions  which 
were  deemed  excessive  in  some  quarters.  The  bank 
undertook  the  underwriting  and  emission  on  a  large  scale 
of  German  state  and  communal  loans.  It  had  a  leading 
part  in  the  emission,  among  others,  of  the  loans  of  the 
following  states:  Argentina,  Bosnia,  Bulgaria,  Chile, 


477 


National     Monetary     Commission 

China,  Mexico,  Spain,  and  Turkey  (for  particulars  see 
Append.  V  and  VI).  It  took  up  in  their  entirety  the 
German  and  Prussian  loans  of  1899,  amounting  altogether 
to  200,000,000  marks. 

The  bank  repeatedly  suffered  losses  through  the  specu- 
lations of  the  managers  of  its  branches  and  commandites; 
thus  in  1882  through  the  speculations  of  the  managers  of 
its  New  York  commandite,  in  1897  through  the  specula- 
tions of  the  manager  of  an  exchange  office  (Weeks elstube) 
of  the  Hamburg  branch,  and  in  1891  through  the  specu- 
lations and  embezzlements  of  a  Berlin  official,  which 
necessitated  a  writing  off  of  1,000,000  marks.  The  losses 
in  the  current-account  business  have  been  relatively  small, 
and  in  view  of  the  large  surplus  have  had  no  appreciable 
effect  on  the  bank. 

On  the  other  hand,  like  the  other  banks,  it  had  to 
write  off  repeatedly  serious  losses  on  account  of  partici- 
pations and  industrial  business.  Under  this  head  fall 
the  losses  due  to  the  liquidation  of  its  early  branches  in 
Shanghai  and  Yokohama,  of  its  commandites  in  New 
York  and  Paris;  the  Argentine  participations  and  emis- 
sions, the  Deutsch-Amerikanische  Treuhand-Gesellschajt 
(German- American  Fidelity  Company) ,  the  Mannesmann- 
undertaking;  also  losses  occasioned  through  its  partici- 
pations and  connections  in  the  United  States,  especially 
with  the  American  railways,  such  as  the  Northern  Pacific 
Railroad  Company.  The  successful  reorganization  of 
this  road  is  due  primarily  to  the  energy  and  sagacity  of 
the  Deutsche  Bank. 

The  standing  which  the  German  mark  bills  attained 
in  foreign  markets,  and  which  constituted  the  first  stage 


478 


The     German     Great    Banks 

in  the  increasing  independence  of  our  export  trade  from 
foreign  intermediaries,  is  primarily  the  work  of  the 
Deutsche  Bank  and  in  the  second  place  that  of  the 
D  iscont  o-Gesellschaf t . 

The  German  Bank  participated  and  as  a  rule  took  a 
leading  part  in  all  the  joint  enterprises  of  the  large  banks, 
initiated  for  the  advancement  of  the  foreign  and  espe- 
cially the  oversea  relations  of  Germany,  as,  for  instance, 
in  the  founding  of  the  Deutsch-Asiatische  Bank  (1889), 
the  Banco,  Commerciale  Italiana  (1894),  the  Banque  In- 
ternationale de  Bruxelles  (1898),  the  Schantung-Bergbau 
und  Eisenbahn-Gesellschaft  (1899),  the  telegraph  and 
cable  companies  of  the  years  1898  to  1908,  and  the 
Kamerun-Eisenbahngesellschaft  ( 1 906) . 

The  following  table  shows  in  detail  the  development 
of  the  Deutsche  Bank: 


479 


National     Monetary     Commission 


Statistical  re-view  of  the  develop 


End  of 
calendar 
year— 

Cash,  coupons, 
bills,  bank 
credits,  con- 
tango, treasury 
bills  and 
securities. 

Credits  on 
current 
account  and 
deposits. 

Debits  on  current  account, 
advances  on  merchandise,  etc. 

Acceptances. 

(a)  Secured. 

(b)  Unsecured. 

Marks. 

Marks. 

Marks. 

Marks. 

Marks 

1870.  .  .  . 

5,  680,689 

2,352,265 

3,  237,  181 

2  ,  158,  120 

2,463,  740 

1871  .... 

22,  739,  225 

22  ,  922  ,  080 

n,  742,  210 

7,828,  140 

7,  600,  918 

1872  .... 

41  ,  602  ,  899 

38,  671,  172 

27,842,441 

18,  293,  382 

23,  512,  090 

1873-  ... 

72,854,311 

50,  727,055 

25,  184,925 

12,487,373 

30,269,944 

1874..-. 

81,  435,  860 

56,977,289 

17,  521,326 

17,447,623 

37,614,  960 

1875..-. 

72,  117,  806 

43,  547,  190 

24,  555,468 

17,  091,  166 

42,475,  164 

1876.  .  .  . 

no,  373,  161 

96,  454,424 

35,312,  592 

16,328,058 

41,038,337 

1877-  ... 

65,  103,  158 

41,  546,656 

41,310,408 

13,  400,  531 

38,836,891 

1878  

73,  577,  426 

48,  471,  197 

42,  776,  959 

13,  n7,797 

44,032,363 

1879  

92,679,843 

68,585,210 

56,  035,  ooo 

14,  178,  119 

48,  205,643 

1880  

85,896,970 

63,  938,  491 

49,490,850 

16,349,525 

45,834,  592 

1881.  ... 

no,  913,  709 

92,  471,  665 

64,  282,435 

21,  235,  646 

54,  216,  214 

1882  

106,  236,  471 

84,  705,  101 

66,  649,  401 

19,  184,  402 

46,  140,476 

1883.  .  .  . 

129,  277,  138 

107,  724,  165 

80,  060,  464 

28,096,  181 

69,  048,  298 

1884  

149,917,  199 

122,  280,  372 

8s,725,6I8 

36,  503,597 

83,658,784 

1885  

164,  517,  101 

132,  414,350 

91,  567,  60  i 

27,  876,  166 

80,  942,  605 

1886.... 

iS9,  531.662 

137,  809,  036 

91,  567,364 

26,  820,  749 

82,  753,414 

1887.  .  .  . 

175,801,  987 

159,  040,  048 

95,685,  222 

30,  173,  948 

88,821,  789 

1888.... 

208,  419,  928 

185,939,718 

106,  626,  950 

42,527,464 

93,  912,  184 

1889  

217,  646,  924 

217,  322,  621 

139,  041,  615 

40,  600,  115 

105,  801,  771 

1890.  .  .  . 

234,  758,079 

203,  247",  700 

115,  164,  961 

34,  061,  711 

101,  076,  473  . 

1891.  .  .  . 

248,828,  238 

200,  297,  992 

86,  918,  718 

28,086,866 

85,007,  988 

1892.  .  .  . 

252,553,545 

205,848,  449 

103,378,  662 

29,898,397 

96,093,677 

1893  

247,  762,  714 

214,  453,  616 

105,  769,429 

36,691,  151 

96,325,332 

1894.  -  -  - 

285,  869,  072 

250,  630,  525 

110,958,904 

33,  983,676 

93,865,465 

1895-  •  •  • 

296,  959,  088 

295,845-  950 

177,  124,944 

46,  937,  481 

122,496,507 

1896  

314,  997,810 

287,217,599 

154,  761,993 

45,  006,  718 

116,  646,  487 

1897-  •  •  • 

378,777,898 

359,  7i8,  954 

182,  405,  232 

58,  666,  995 

130,  511,  769 

1898  

436,939,357 

444,  068,  368 

203,  112,  894 

61,992,  295 

128,  340,  214 

1899.  .  .  . 

453,857,134 

479,947,  2ii 

232,  196,  609 

72,  764,087 

141,883,555 

1900.  .  .  . 

486,  153,982 

531,  166,  114 

244,553,839 

71,806,556 

141,  131,  301 

1901  .... 

573.593,263 

630,  259,  107 

254,245,936 

72,  492,  174 

142,  420,  917 

1902  .... 

674,679,032 

720,  476,  427 

264,996,  941 

71  ,  060,  603 

145.301,506 

1903.  •  .  . 

722,163,979 

789,374,38i 

314,525,405 

77,324,  283 

179,  808,  067 

1904.  •  .  . 

840,  004,  989 

893,594,072 

334,315,096 

96,  022,  215 

185,  083,  202 

1905.  .  .  . 

931,983,038 

1,064,340,143 

382,712,175 

117,  181,085 

197,843,098 

1906.  .  .  . 

i,  029,  740,  885 

1,250,744,129 

473,  181,  109 

160,  243,  675 

226,  no,  088 

1907  .... 

1,024,584,737 

1,264,405,721 

509,  798,  132 

177,054,  188 

263,537,867 

1908.  .  .  . 

1,014,  205,  572 

1,268  816,252 

515,652,163 

160,947,  532 

231,  948,  426 

480 


The     German     Great    Banks 


tnent  of  the  Deutsche  Bank. 


Syndicate 
participa- 
tions. 

Capital 
stock. 

Surplus.  K6 

Dividends. 

Aggregate  turn- 
over during  year. 

End  of 
calendar 
year  — 

Marks. 

Marks. 
15  ,  ooo,  ooo 

Marks. 
36,  215 

Per  cent. 
5 

Marks. 
239,  342,  864 

1870 

830,932 
1,738,834 
1,894,  900 
i,  090,  216 
2,  494,  231 

30,  ooo,  ooo 
45,000,000 

161,  972 
{703,611 
1,308.987 
2,341,569 
3,434,506 
4   411    581 

8 
8 
4 
5 
3 
6 

951,445.036 
2,891.  276,883 
3,  765.  140,668 
5,  509,  149,588 
5.  512,596,634 
7,132   497   077 

1871 
1872 
1873 
1874 
1875 
1876 

i,  267,  186 
3,  798,  1  13 

4,857,429 
5,  472,  928 

6 
f>Ya 

7.325,231.848 
7,  129,  850,  865 

i877 
1878 

6,  646,  742 

9 

8,834   737   806 

1879 

6,  942,  299 
14,375.  726 
14,  740,480 
16,  146,  ooo 
i  i  ,  302,  239 

\      60,000,000 

I 

7,  776,419 
J      9-354,059 
\    13,  816,  131 
14,381,884 
15  ,  309,  710 

10 

io& 

10 

9 
9 

10,484,497.  746 
12,898,953,540 
12,054,513.781 
13,  205,  456,803 
I5>  650,  971  ,  no 

1880 
1881 
1882 
1883 
1884 

8   773   322 

15    748  039 

9 

15.  147   999   465 

1885 

20,886,  257 
23  ,  549,  785 

16,  212,  611 
16,  659,  769 

9 
9 

16,  180,  649,  366 
18,  062,  819,  201 

1886 
1887 

21,493,311 
29,  710,  209 

[      75,000,000 

J    23,108,580 
1    23,852,467 

9 

10 

23,381,792,352 
28,  125,  250,988 

1888 

1889 
1890 

26    901    840 

25    162   756 

9 

25    559   236   637 

1891 

20,799,573 
21  ,  794,  852 

25.592,561 
26,  025  ,  280 

8 

8 

25.331.274.743 
29,  152  ,  668,  706 

1892 
1893 

13    847    627 

26  590  882 

9 

31   617    185   805 

1894 

30,938,  125 
33,882,758 
31,634,  568 
35,868,442 

>     100,000,000 

150,  ooo,  ooo 

[   38,634,390 
1  39,651,  027 
45,275.637 
46,  458,  129 

10 

10 

1C 

loK 

37,900,537,501 
35,497.085,015 
37,913.360,703 
44,395.084,329 

1895 
1896 
1897 
1898 
1899 

35   056   687 

u 

49,  773   486   885 

35.505,516 
32,355.392 
33,058,426 
23,563,873 
35   367   911 

160,  ooo,  ooo 
i  80,  ooo,  ooo 

50,642,845 
55,  283,  295 
59,030,455 
76,662,853 
78  398   560 

ii 
ii 
ii 

12 
12 

51,  815,  610,  701 
56,783,415.833 
59,  640,  106,  144 
66,897,  131.  338 

1901 
1902 
1903 
1904 

45,341,545 
53,  427,  886 

200,  000,  000 

100,  000,000 
101  ,  831  ,  917 

12 
12 

85.590,594,109 
91,611,  054,  053 

1906 
1907 

36,  841  ,  129 

I  2 

1908 

90311"— II- 


-32 


481 


National     Monetary     Commission 

THE  DISCONTOGESElvIvSCHAFT. 

The  Disconto-Gesellschaft  was  founded  at  first  as  a 
Kreditgesellschaft  (credit  partnership)  by  the  later-day 
Prussian  Minister  of  Finance,  David  Hansemann,  and  in 
1856  transformed  into  a  Kommanditgesellschaft  auf  Aktien 
(limited  stock  company),  under  the  firm  name  Direktion 
der  Disconto-Gesellschaft.  As  we  showed  above,  this  bank, 
as  early  as  the  first  period  (1851-1870),  took  a  leading 
part  in  the  fostering  of  the  current-account  business  and 
in  the  underwriting  and  emission  of  German  state  and 
communal  loans  and  railway  shares. 

Until  the  year  1900,  however,  i.  e.,  for  nearly  fifty 
years,  this  company  apart  from  commandite  participations 
adhered  strictly  to  the  policy  of  strict  business  centraliza- 
tion. It  was  only  through  the  fostering  and  extending 
of  over-sea  relations  that  it  came  to  establish  in  1900  a 
branch  in  London.  In  1901  the  liquidation  of  the  banking 
house  M.  A.  von  Rothschild  &  Sons  in  Frankfort-on-the- 
Main  led  to  the  opening  of  a  branch  in  that  city.  During 
the  second  period  it  was  prominently  connected,  as  a 
member  of  the  Rothschild  syndicate,  with  all  the  under- 
writing and  issue  business  conducted  by  this  group, 
especially  the  state  loans  and  the  railway  enterprises  in 
Austria  and  Hungary,  also  with  the  issue  of  Russian, 
Roumanian,  Chinese,  and  Japanese  loans. 

It  fostered  industrial  relations  even  during  the  first 
period  with  relatively  good  success,  though  refraining  as 
a  rule  from  speculative  excesses.  In  so  far,  however,  as 
it  permitted  itself  to  be  led  into  financing  and  managing 
industrial  enterprises,  it  had  to  suffer  the  same,  and  at 


482 


The     German     Great    Banks 

times,  even  worse  experience  than  the  other  banks,  as, 
for  instance,  in  the  case  of  the  taking  over  of  the 
Heinrichshutte  (Heinrich  Smelting  Works)  in  1857;  the 
founding  in  1872  and  the  subsequent  development  of 
the  Dortmunder  Union;  the  Grosse  Venezuela-Eisenbahn- 
Gesellschaft,  the  Internationale  Druckluft-  und  Elektrizitdts- 
Gesellschaft  (Popp),  founded  in  1890,  and  the  blasting 
works  at  the  Iron  Gate  in  Hungary  taken  over  from 
the  firm  G.  Luther.  Between  the  years  1891-1894  the 
Disconto-Gesellschaft  had  to  write  off  losses  of  about 
10,000,000  marks  on  account  of  its  industrial  and  other 
participations. 

On  the  other  hand,  in  1873  it  founded  the  Gelsenkirchener 
Bergwerksgesellschaft  (G.  Mining  Co.),  which  became  one 
of  the  most  prominent  concerns  in  the  mining  industry. 
Adolph  von  Hansemann,  who  at  that  time  was  one  of 
the  general  partners  of  the  Disconto-Gesellschaft,  and 
its  most  talented  manager,  became  the  chairman  of  the 
supervisory  board  of  the  new  mining  company.  In  this 
way  the  bank  secured  numerous  connections  with  indus- 
trial undertakings  and  cartels.  These  connections  became 
even  more  important  when  on  January  i,  1905,  a  com- 
munity of  interests  was  formed  between  the  Gelsenkirchener 
Bergwerksgesellschaft,  the  Aachener  Hutten-Aktien-Verein 
Rote  Erde  (Aix-la-Chapelle  Smelting  Company  Rote  Erde) 
and  the  Schalker  Gruben-  und  Hutten-Verein  (Schalke 
Mining  and  Smelting  Company) . 

The  Disconto-Gesellschaft  actively  and  successfully 
participated  in  the  organization  of  the  Rhenish- West- 
phalian  Coal  Syndicate,  which  was  finally  accomplished 
in  1893,  after  many  grave  obstacles  had  been  overcome. 


483 


National     Monetary     Commission 

In  the  eighties  and  nineties  it  effected  a  number  of  issues 
for  the  August  Thyssen  Mining  and  Smelting  enterprises, 
especially  the  Schalker  Gruben-  und  Hutten-V erein  and  the 
Gewerkschaft  Deutscher  Kaiser.  In  1874  it  participated  in 
a  syndicate  formed  under  the  leadership  of  the  Seehand- 
lung  (the  Prussian  State  Bank)  for  the  underwriting  and 
issuing  of  a  5  per  cent  loan  of  10,000,000  thalers  for  the 
Krupp  Works.  This  operation  deserves  special  mention 
because,  on  this  occasion,  for  the  first  time  in  Germany, 
the  loan  took  the  form  of  fractional  bonds  secured  by 
blanket  mortgage  and  provided  for  common  representa- 
tion of  the  holders  of  these  bonds,  which  since  then  has 
become  the  common  form  of  such  obligations.467 

The  Disconto-Gesellschaft  maintains  close  relations  with 
the  Rheinische  Stahlwerke  (since  1877),  the  Stumm  Works 
in  Neunkirchen,  the  Aktiengesellschaft  Gute  Hoffnungs- 
Hutte  (Gute  Hoffnung  Smelting  Company)  in  Oberhausen, 
the  Bochumer  Verein  fur  Bergbau  und  Gusstahlfabrika- 
tion  (Bochum  Mining  and  Cast  Steel  Manufacturing  Com- 
pany) and  the  Kattowitzer  Aktiengesellschaft  fur  Bergbau- 
und  Huttenbetrieb  (Kattowitz  Mining  and  Smelting  Com- 
pany) ,  the  latter  founded  with  a  capital  stock  of  16,000,000 
marks  through  the  reorganization  of  the  mining  and  smelt- 
ing properties  of  the  von  Tiele-Winckler  estate. 

The  Disconto-Gesellschaft  through  its  connections  with 
Herm.  Schmidtman  and  the  Schmidtman  mining  and 
other  enterprises,  especially  the  potash  works  in  Aschers- 
leben,  stands  in  close  relation  to  the  potash  industry. 
In  the  field  of  machinery  construction  it  is  closely  related 
to  the  Schichau  ship  yards  in  Elbing  and  Danzig,  the 
Henschel  Machine  Works  in  Cassel,  the  Saxon  Machine 


484 


The     German     Great    Banks 

Works  (formerly  Richard  Hartmann)  in  Chemnitz,  the 
Berlin  Machinery  Construction  Company  (formerly  L. 
Schwartzkopff)  and  the  machine  and  milling  machinery 
works  of  G.  Luther  in  Brunswick. 

The  Disconto-Gesellschaft  has  always  taken  a  prominent 
interest  in  the  business  operations  of  the  I^udwig  lyoewe 
Company  and  in  all  the  enterprises  founded  by  this  com- 
pany, a  managing  partner  of  the  Disconto  Bank  serving  on 
the  supervisory  board  of  each  of  these  undertakings.  Thus 
it  participated  in  the  administration  and  the  security  issues 
of  the  Deutsche  Wafjen-  und  Munitions fabriken  (German 
Arms  and  Ammunition  Works)  in  Berlin  and  Karlsruhe,  the 
Union-Elektrizitdts-Gesellschaft  (Union  Electric  Company) , 
which  took  over  the  electrical  department  of  the  Ludwig 
Loewe  Company,  the  Gesellschaft  fur  Elektrische  Unterneh- 
mungen  (Corporation  for  Electrical  Enterprises),  etc. 

It  also  cooperated  in  a  large  number  of  stock  and  bond 
issues  of  the  firm  of  Siemens  &  Halske. 

In  the  sphere  of  insurance  it  maintains  close  relations 
to  the  Aachener  und  Munchener  Feuerver  sicker  ungs- 
Gesellschaft  (Aix-la-Chapelle  and  Munich  Fire  Insurance 
Company),  the  Lebens-  und  Feuerversicherungsbank  (I/ife 
and  Fire  Insurance  Bank)  in  Gotha,  the  Lebensversiche- 
rungs-Gesellschaft  Nordstern  (Northern  Star  Life  Insurance 
Company),  which  was  organized  in  1881  in  Berlin, etc.  It 
participated  in  the  financing  of  minor  and  secondary  rail- 
ways (Klein-  und  Nebenbahnen)  only  through  its  close 
relations  to  the  Westdeutsche  Eisenbahn-Gesellschaft. 

In  the  sphere  of  real  estate  business  proper  the  Disconto- 
Gesellschaft  participated  only  occasionally,  assisting  in 
the  parcelling  of  some  land  tracts. 


485 


National    Monetary     Commission 

In  more  recent  times  the  Disconto-Gesellschaft  de- 
veloped an  energetic  activity  in  the  petroleum  field.  (See 
above,  p.  418  and  following.) 

Finally,  the  Disconto-Gesellschaft  has  been  very  active 
in  the  sphere  of  mortgage  and  agricultural  credit.  In 
1864  it  participated  in  the  founding  of  the  Erste  Preus- 
sische  Hypotheken-Gesellschaft  (First  Prussian  Real  Estate 
Mortgage  Company),  which  was  later  (Mar.  4,  1870)  taken 
over  by  the  Preussische  Zentral-Bodenkredit-Aktien-Gesell- 
schaft;  and  in  1895  in  the  organization  of  the  Landbank, 
which  was  intended  to  encourage  domestic  colonization 
and  to  promote  German  landed  interests  and  agriculture  in 
the  eastern  provinces.  The  presidency  in  the  supervisory 
board  of  the  new  institution  was  taken  by  the  managing 
partner  of  the  Disconto-Gesellschaft,  Ad.  von  Hansemann. 

The  picture  so  far  presented  of  the  industrial  and  kin- 
dred activities  of  the  Disconto-Gesellschaft,  while  unusually 
varied  and  animated,  does  not,  however,  vary  materially 
from  the  general  picture  of  the  activity  of  the  other  great 
banks  in  the  same  field. 

As  regards  concentration  the  Disconto-Gesellschaft,  as 
we  shall  show  later  in  greater  detail,  was  active  as 
early  as  1871,  when  it  organized  the  Promnzial-Disconto- 
Gesellschaft  in  Berlin,  which  in  turn  became  the  parent 
institution  of  a  large  number  of  other  provincial  discount 
banks.  We  shall  explain  later  the  reasons  why  this  first 
step  necessarily  failed.  The  failure  caused  the  Diseonto- 
Gesellschaft  to  refrain  for  a  long  time  from  founding  any 
subsidiary  institutions.  It  was  only  in  1880  (Feb.  13) 
that  the  Disconto-Gesellschaft  participated  in  the  recon- 
struction of  the  Handels-  und  Plantagen-Gesellschaft  (Com- 


486 


The     German     Great    Banks 

mercial  and  Plantation  Company)  of  Samoa,  more  par- 
ticularly in  the  organization  of  the  Neu  Guinea-Kompag- 
nie  and  in  the  preliminary  negotiations  during  the  years 
1883  to  1885.  By  assuming  certain  obligations  this  com- 
pany, on  May  17,  1885,  obtained  a  special  charter  giving 
it  the  rights  of  territorial  sovereignty;  also  the  exclusive 
privilege  to  acquire  landed  property. 

These  activities  were  followed  in  rapid  succession  by 
the  organization  of  the  Brasilianische  Bank  fur  Deutsch- 
land  (Brazilian  Bank  for  Germany)  in  1887,  the  estab- 
lishment of  commandites  in  Buenos  Aires  and  Antwerp 
(1890),  the  founding  of  the  Bank  fur  Chile  und  Deutsch- 
land  (1895),  the  Banca  Generala  Romana  (1897),  the  Otavi- 
Minen-  und  Eisenbahn-Gesellschaft  (Otavi  Mining  and 
Railway  Company)  (1900),  the  Banque  de  Credit  in  Sophia 
(1905),  the  Deutsch-Ostafrikanische  Bank,  and  the  Deutsche 
Afrika-Bank  in  1905.  Aside  from  this,  the  Disconto- 
Gesellschaft  participated  in  all  the  enterprises  undertaken 
jointly  by  the  large  banks,  thus,  in  the  founding  of  the 
Deutsch-Asiatische  Bank  (1889),  the  Banca  Commerciale 
Italiana  (1898),  the  two  Shantung  companies  (1899),  the 
telegraph  and  cable  companies  (1898-1908),  and  the 
Kamerun-Eisenbahn-Gesellschaft  ( 1 906) . 

From  what  has  been  said  it  appears  that  the  special 
characteristics  of  the  Disconto-Gesellschaft  were  the 
extensive  and  far-sighted  assistance  rendered  by  it  to 
industrial  exports,  as  well  as  to  all  foreign,  particularly 
oversea  commerce;  also  the  fostering  of  the  regular  bank- 
ing business,  especially  the  current  account  business, 
begun  in  the  first  period  and  developed  with  great  skill 
and  success  during  the  second  period. 


487 


National    Monetary     Commission 

The  results  in  the  various  lines  of  operations,  while  very 
considerable,  are  not  so  steady  as  those  of  the  Deutsche 
Bank.  This  is  particularly  brought  out  in  the  presenta- 
tion, by  ten-year  periods,  of  the  current  account  figures, 
as  found  in  the  jubilee  report  (1901)  of  the  Disconto- 
Gesellschaft. 

During  the  first  nine  years  (beginning  with  1852)  the 
debits  on  current  account  amounted  to  32,000,000  marks 
in  round  numbers.  At  the  close  of  the  decade  they 
showed  a  decline  in  1869  to  about  29,000,000  marks, 
though  rising  again  in  1870  to  30,500,000  marks. 

The  next  decade  since  1871,  starts  with  the  greatly  in- 
creased figure  of  nearly  93,000,000  marks;  at  the  close  of 
1880  the  amount  had  fallen  again  to  49,000,000  marks. 
In  the  decade  following  we  see  the  figures  rapidly  rise 
from  53,000,000  marks  in  1881  to  112,000,000  marks  in 
1885,  and  then  again  decline  to  82,500,000  marks  in  1890. 

Beginning  with  1901,  however,  we  find,  with  the  excep- 
tion of  a  few  small  interruptions,  an  almost  steady  growth 
of  the  debits  on  current  account,  which  reached  a  total  of 
294,000,000  marks  at  the  close  of  the  fiscal  year  1908. 

The  figures  of  credits  in  current  account  show  a  similar 
fluctuation.  In  1860  they  were  about  13,000,000  marks, 
in  1865  they  had  fallen  to  10,500,000  marks,  while  the 
closing  year  of  the  decade,  1870,  showed  a  decided  in- 
crease to  39,000,000  marks.  In  1877  the  amount  had 
declined  to  29,000,000  marks,  in  1880  it  had  risen  to 
55,000,000  marks,  and  in  the  next  decade,  in  1885,  again 
the  maximum  figure  up  to  that  time  was  shown,  namely, 
154,000,000  marks,  which,  however,  declined  at  the  close 
of  the  decade  (1890)  to  90,000,000  marks. 


488 


The     German     Great    Banks 

Similarly,  beginning  with  1891,  and  with  much  smaller 
fluctuations  than  before,  a  steady  growth  of  the  credit 
figures  is  shown,  the  statement  for  December  31,  1908, 
indicating  a  total  of  credits  on  current  account  of  235,000,- 
ooo  marks. 

In  the  discussion  of  the  deposit  business  we  gave  the 
reasons  why  the  deposit  business  of  the  Disconto-Gesell- 
schaft  showed  similar  and  at  times  even  greater  fluctu- 
ations. We  may  disregard  the  first  period  because  at 
that  time,  as  we  have  shown  (p.  73),  there  was  no  sys- 
tematic fostering  of  the  deposit  business. 

In  1870  the  total  deposits  amounted  to  3,500,000  marks 
only. 

The  new  period  begins,  however,  with  15,000,000  marks 
deposits  (1870),  which  rapidly  grew  to  nearly  65,000,000 
marks  in  1873,  but  dropped  to  10,000,000  marks  in  1880. 
Similar  fluctuations  occurred  in  the  following  decade, 
which  began  in  1881  with  20,000,000  marks.  By  1887 
the  amount  had  declined  to  8,000,000  marks,  while  at  the 
close  of  the  decade  (1890)  a  total  of  36,500,000  marks  was 
reached.  The  next  decade  again  starts  with  only  17,000,- 
ooo  marks,  but,  beginning  with  1895,  when  the  Disconto- 
Gesellschaft,  with  the  view  of  systematically  fostering  the 
deposit  business,  opened  deposit  offices,  the  amount  in- 
creased steadily  to  48,000,000  marks  in  1900.  According 
to  its  1908  statement,  in  which,  however,  the  deposits  are 
calculated  in  a  different  manner,  (p.  207) ,  the  deposits  of 
the  Disconto-Gesellschaft  amounted  to  218,500,000  marks. 

Similar  fluctuations  are  observed  in  the  case  of  the  com- 
missions, which  in  1870  amounted  to  about  1,000,000 


48g 


National    Monetary     Commission 

marks.  From  1,333,000  marks  in  1871  they  increased  to 
4,660,000  in  1872,  declined  to  1,500,000  in  1876,  rose  to 
4,500,000  in  1900  and  to  6,500,000  marks  in  1908. 

The  dividends  on  the  commandite  capital  of  the  Dis- 
conto-Gesellschaft  in  the  second  period  (those  of  the  first 
period  were  shown  on  p.  68)  were  as  follows: 


Year. 

Per  cent. 

Year. 

Per  cent. 

Year. 

Per  cent. 

1871   

24 

1884  

1  1 

1897  

10 

1872 

27 

1885 

1898 

1873     ...  . 

14 

1886  

10 

1899  

10 

1874  

12 

1887  

10 

1900  

9 

187? 

1888 

12 

1901 

8 

1876  

4 

1889  

14 

1902  

8X 

1877 

1890 

8K 

1878 

6% 

1891  

8 

1904  

8% 

l87Q 

1892 

6 

1880 

1893 

6 

1906 

9 

!88i  

11^3 

1894  

8 

1907  

9 

1882 

loM 

1895 

1908 

g 

1883  . 

ioM 

1896  

10 

There  is  no  other  German  credit  bank  whose  annual 
dividends  ever  came  near  the  dividends  of  24  and  27  per 
cent,  which  the  Disconto-Gesellschaft  was  able  to  dis- 
tribute in  the  years  1871  and  1872. 

The  capital  stock  of  the  Disconto-Gesellschaft  on  De- 
cember 31,  1908,  amounted  to  170,000,000  marks,  while 
the  surplus  amounted  to  57,500,000  marks,  or  33.88  per 
cent  of  the  capital  stock. 

The  manner  in  which  the  current  banking  business  of 
the  Disconto-Gesellschaft  has  increased  is  illustrated 
statistically  in  its  Jubilee  Report  of  1901  (p.  25)  by  the 
amount  of  correspondence  carried  on  in  this  branch  of 
business. 


490 


Th 


e  r  m  a  n 


r  e  a 


t    B 


a  n 


Year. 

Letters 
received. 

Letters 
sent. 

1852 

1870  
1880  

85.800 
2O4,  877 

87,513 
2O8      24O 

1890 

1900  

The  Disconto-Gesellschaft  from  the  start  was  promi- 
nently connected  with  the  Prussian  Syndicate  and 
subsequently  with  the  Rothschild  Syndicate,  thus  par- 
ticipating in  the  Prussian,  Austrian,  and  Hungarian 
state  loans.  It  was  likewise  a  member  of  the  syndicate 
organized  for  handling  the  Russian  and  Italian  state 
loans  and  those  of  the  German  Empire.  It  took  a  leading 
part  in  the  financial  operations  of  the  Chinese  Govern- 
ment and  participated  to  a  very  large  extent  in  the  issue 
of  Brazilian  and  Argentine  loans.  It  was  also  the  leading 
member  of  the  bank  syndicate  which  handled  the  various 
Roumanian  state  and  railway  loans  (for  particulars  see 
Append.  V.  and  VI). 

In  reviewing  the  activities  of  the  Prussian  and  the 
Rothschild  syndicates  as  well  as  the  other  great  inter- 
national financial  operations  of  the  German  banks  during 
the  second  period,  the  jubilee  volume  of  the  Disconto- 
Gesellschaft  contains  the  following  remarks:  "The  small 
proportion  of  failures  in  carrying  out  the  numerous  enter- 
prises of  the  last  half  of  the  nineteenth  century  *  *  * 
is  a  lasting  glorious  testimony  to  the  honest  and  efficient 
management  of  the  financial  business  of  this  period." 
A  considerable  part  of  this  fully  deserved  praise  may  be 
claimed  by  the  Disconto-Gesellschaft. 


491 


National    Monetary     Commission 

THE    DRESDNER    BANK. 

The  Dresdner  Bank,  which  was  founded  in  1872  and  in 
1 88 1  transferred  its  center  of  activity  to  Berlin,  by  the 
establishment  of  a  branch  there,  claims  our  special 
interest  in  a  number  of  directions. 

It  achieved  remarkable  success  in  the  deposit  business 
within  an  unprecedentedly  short  period,  although  it  was 
not  until  1896  that  it  followed  the  example  of  the  Deutsche 
Bank  in  establishing  deposit  offices.  At  the  close  of  1908 
it  was  conducting  an  extensive  deposit  business  by  means 
of  its  1 6  branches  and  44  deposit  offices. 

Its  deposits  grew  within  less  than  twenty  years  from 
less  than  3,000,000  marks  in  1875  to  94,000,000  at  the 
end  of  1894,  and  reached  an  aggregate  of  224,000,000 
marks  at  the  close  of  1908,  or  fifteen  years  later.  It  thus 
overtook  the  Disconto-Gesellschaft  in  this  branch  of 
business,  although  the  latter  had  been  in  this  field  a 
much  longer  time. 

In  the  same  rapid  and  brilliant  manner  it  managed  to 
develop  its  regular  business,  the  first  extensive  increase 
of  which,  just  as  in  the  case  of  the  Deutsche  Bank,  dates 
back  to  the  seventies,  when  it  participated  in  the  liquida- 
tion of  4  Saxon  banks.  Its  further  growth  is  due  largely 
to  the  founding  of  branches,  the  absorption  of  a  large 
number  of  banks  and  private  banking  concerns,  and  the 
establishment  of  numerous  communities  of  interest.  Its 
branches  numbered  16  at  the  close  of  1908,  this  being  the 
second  largest  number  for  any  German  bank.  It  also 
managed  to  secure  a  strong  foothold  in  southern  Germany 
by  taking  over  in  1904  the  banking  house  von  Erlanger 


492 


The     German     Great    Banks 

&  Sons  at  Frankfort-on-the-Main  with  its  extensive  rami- 
fications, in  the  place  of  which  it  established  a  branch 
of  its  own.  In  the  same  year  it  secured  a  large  clientele 
among  the  membership  of  the  mutual  credit  societies  by 
taking  over  the  Deutsche  Genossenschaftsbank  S  or  gel,  Parri- 
sius  &  Co.  For  this  new  business  it  established  a  special 
mutual  credit  department. 

The  credits  on  current  accounts  rose  from  4,000,000 
marks  in  1873  to  95,000,000  marks  in  1894  and  371,000,000 
marks  in  1908;  the  debits  from  about  9,000,000  marks  in 
1875  to  about  95,000,000  marks  in  1894  and  445,000,000 
marks  in  1908.  As  a  result  of  great  alertness  and  liberal 
commission  and  interest  terms,  the  bank  succeeded  in 
securing  a  large  number  of  customers  wherever  it  ob- 
tained a  footing,  first  among  the  circles  of  Saxon  industry, 
and  soon  after  among  wider  circles.  Its  clientele  increased 
considerably  through  the  absorption  in  rapid  succession  of 
a  number  of  banks  and  private  banking  houses,  and  later 
through  the  entering  of  community-of -interest  relations 
with  other  banks  in  Rhineland- Westphalia  and  in  Silesia, 
by  following  the  example  of  the  Deutsche  Bank.  The 
number  of  industrial  undertakings,  for  which  it  acts  as 
fiscal  agency  (Zahlstelle) ,  is  exceeded  only  by  that  of  the 
Deutsche  Bank. 

Since  1892  it  also  undertook  the  systematic  promotion 
of  foreign  and  oversea  business,  by  establishing,  just  as 
the  Deutsche  Bank,  though  not  in  the  same  order  of 
time,  branches  in  Hamburg  (1892),  where  it  absorbed 
the  Anglo-Deutsche  Bank,  next  in  Bremen  (1895)  and 
finally  also  in  London  (1901). 


493 


National    Monetary     Commission 

Moreover,  as  early  as  1889  it  participated  in  the  forma- 
tion of  the  Anatolian  Railway  Company  and  the  Company 
for  the  Operation  of  Oriental  Railways  (Betriebsgesellschajt 
der  Orientalischen  Eisenbahneri) ,  of  the  Deutsch-Asiatische 
Bank,  and  the  Deutsch-Afrikanische  Bank.  In  1891  it 
took  part  in  the  foundation  of  the  Bank  fur  Orientalische 
Eisenbahnen,  in  1894  in  the  organization  of  the  Banca 
Commerciale  Italiana,  in  1899  in  the  establishment  of  the 
two  Shantung  companies,  and  during  the  period  1898- 
1908  in  the  organization  of  the  Deutsche  Telegraphen- 
Gesellschaften  und  Kabelwerke,  in  the  establishment  of  the 
Deutsch-Westafrikanische  Bank  (1904-5)  and  of  the 
Kamerun-Eisenbahngesellschaft  in  1906. 

About  the  end  of  1905,  jointly  with  the  A.  Schaaffhau- 
sen'scher  Bankverein  (with  which  it  had  entered  in 
1903  into  community-of -interest  relations,  now  practi- 
cally dissolved)  and  the  Nationalbank  fur  Deutschland, 
it  established  the  Deutsche  Orienibank,  and  about  the 
same  time,  in  conjunction  with  the  first-named  institu- 
tion, the  Deutsch-Sudamerikanische  Bank. 

It  also  promoted  and  fostered  with  growing  success 
the  over-sea  "rembours"  business  (see  p.  428),  without, 
however,  attaining  in  this  field,  as  well  as  in  the  general 
field  of  international  connections,  nearly  as  favorable 
results  as  the  Deutsche  Bank  or  the  Disconto-Gesellschaft. 

In  various  ways  it  sought  to  extend  its  continental 
foreign  connections.  Thus,  with  the  view  of  promoting 
business  in  Austria- Hungary,  it  entered  into  close  rela- 
tions with  a  number  of  Vienna  banks.  In  order  to 
gain  a  foothold  in  the  Italian  and  Swiss  markets,  it  par- 
ticipated in  the  foundation  of  the  Banca  Commerciale 


494 


The     German     Great    Banks 

Italiana  and  founded  the  stock  company  Speyr  &  Co. 
in  Basle. 

In  the  field  of  "  minor,"  i.  e.,  urban  and  interurban 
railway  enterprises  (Kleinbahn-Unternehmungeri)  the 
Dresdner  Bank  manifested  considerable  activity  by  found- 
ing the  Central  Bank  for  railway  securities  (Centralbank 
fur  Eisenbahnwerte)  and  the  Continental  Railway  Con- 
struction and  Operation  Company  (Kontinentale  Eisen- 
bahnbau-  und  Betriebsgesellschaft)  in  Berlin;  also  by  partici- 
pating in  the  Orenstein  &  Koppel  Works  for  field  and 
"minor  "  railways.  In  1898  it  took  a  prominent  part  in  the 
formation  of  the  Central  Bank  for  railway  securities 
(Centralbank  fur  Eisenbahnwerte),  a  trust  company, 
which  issues  bonds  of  its  own  on  the  basis  of  Austro- 
Hungarian  and  German  railway  securities  acquired  by  it. 
Since  1909  it  has  been  financially  interested  in  the  Oren- 
stein &  Koppel  Works  for  field  and  " minor"  railways, 
Berlin,  amalgamated  with  and  successors  to  the  former 
firm  Arthur  Koppel. 

According  to  Otto  Jeidels  (op.  cit.,  p.  137),  the  number 
of  industrial  emissions  under  the  auspices  of  the  Dresdner 
Bank  for  the  years  1895-1903  compares  as  follows  with 
those  of  the  other  great  banks:  Dresdner  Bank,  220; 
A.  Schaaffhausen'scher  Bankverein,  187;  Berliner  Handels- 
gesellschaft,  170;  Disconto-Gesellschaft,  151;  Deutsche 
Bank,  150;  Darmstadter  Bank,  148. 

In  the  electro-technical  industry  the  Dresdner  Bank 
from  the  very  beginning  participated  jointly  with  the 
Disconto-Gesellschaft  and  the  Darmstadter  Bank  in  the 
firm  L,udwig  Loewe  &  Co.  and  its  subsidiary  companies. 
After  the  absorption  by  the  Allgemeine  Elektrizitdts- 


495 


National    Monetary     Commission 

Gesellschajt  of  the  Union-Elektrizitats-Gesellschaft,  one  of 
the  Loewe  creations,  the  bank  became  a  member  of  the 
A.  E.  G.  syndicate. 

The  bank  from  the  outset  maintained  and  fostered  close 
relations  to  the  bourse.  It  is  this  circumstance  and  the 
peculiar  composition  of  its  security  holdings  which  caused 
the  ofttimes  undeserved  criticism  that  this  bank,  more 
than  any  other  great  bank,  showed  speculative  tendencies. 
It  was  also  pointed  out  that  the  bank  had  considerable 
participations  in  gold-mining  enterprises  and  that  its 
debit  accounts  were  at  times  largely  composed  of  accept- 
ances for  which  the  bank  stood  sponsor.  Fault  was  found 
occasionally  also  with  the  extensive  participations  of 
the  bank  in  real  estate  corporations,  though  its  operations 
in  this  field  were  always  effected  with  great  skill  and 
success.  The  Dresdner  Bank  owned  considerable  real 
estate  in  Wilmersdorf  (Berlin) ,  was  interested  in  the  Moabit 
(Berlin)  and  the  Hanover  real  estate  companies  (Moabiter 
Terrain-Gesellschaft,  Hannover sche  Immobilien-Gesellschaft) ; 
also  in  the  Park  Witzleben  (Berlin)  Real  Estate  Stock 
Company.  It  founded  in  1893  the  Berlin  Real  Estate 
Company  (Berlinische  Boden-Gesellschaft)  and  in  1898 
the  Kurfurstendamm  Real  Estate  Company  (Boden- 
Gesellschaft  Kurfurstendamm).  Among  its  larger  losses 
there  figures  one  of  about  2,500,000  marks,  caused  to  its 
Hamburg  branch  through  engagements  with  the  export 
and  storehouse  company  J.  Ferd.  Nagel,  which  engage- 
ments, however,  had  been  acquired  from  the  Anglo- 
Deutsche  Bank. 

The  bank  distributed  the  following  dividends: 


496 


The     German     Great    Banks 


Year. 

Per  cent. 

Year. 

Per  cent. 

Year. 

Per  cent. 

1873 

i  5 

j88s  

7  •  S 

1897  

9 

6 

1886 

7 

1898    .... 

9 

1875 

!887  

7 

1899  

9 

1876 

1888 

8 

1877 

6  5 

1889 

4 

1878 

1890 

6 

1879   

9 

1891  

7 

1903  

7 

1880 

g 

1892 

T1A 

1881 

1893 

8^ 

j882  

8 

1894  

8 

1906  

SK 

1883 

8 

1895  

8 

1907  

7 

1884 

1896 

8 

1908       . 

7^ 

A  gratifying  percentage  of  these  dividends  is  derived 
from  the  profits  yielded  by  the  regular  or  current 
business.468 

The  share  capital  of  the  Dresdner  Bank  has  been  raised 
nine  times  from  9,600,000  marks  in  1872,  the  year  of  its 
foundation,  to  70,000,000  in  1904,  the  first  increase 
taking  place  as  early  as  1878.  In  1909  its  share  capital 
amounted  to  180,000,000  marks  (increased  to  200,000,000 
marks  by  1910)  while  its  reserves  totaled  51,500,000 
marks — that  is,  28.61  per  cent  of  the  share  capital. 

The  bank  took  a  large  part  in  the  underwriting  and 
emission  of  securities.  In  the  international  issue  field 
it  succeeded  particularly  in  the  emission  of  Mexican 
railway  loans;  it  also  participated,  jointly  with  the  Darm- 
stadter  and  other  banks  in  the  emission  of  Portuguese 
securities.  (See  App.  V  and  VI.)  During  most  years, 
however,  it  managed  to  keep  its  syndicate  participations 
within  moderate  limits.  On  the  other  hand,  its  security 
account  shows  large  holdings  of  industrial  shares,  which 
were  often  used  rather  skilfully  to  support  its  industrial 
policy. 


90311°— ii- 


-33 


497 


National    Monetary     Commission 

On  the  whole  it  may  be  said  that  the  Dresdner  Bank 
has  succeeded  in  very  short  time  in  gaining  the  permanent 
favor  of  a  large  clientele  because  of  the  skill  and  alertness 
of  its  management. 

THE   DARMSTADTER   BANK. 

Among  the  great  banks  the  Darmstadter  Bank  during 
the  first,  and  largely  also  during  the  second  period  took 
special  care  in  guarding  most  carefully  the  liquidity  of 
its  resources  and  the  principle  of  the  distribution  of  risk,  at 
times  even  refusing  to  engage  in  operations  that  might 
impair  in  any  way  the  liquidity  of  its  resources.  If  en- 
gagements of  this  sort  were  unavoidable,  it  showed  the 
utmost  endeavor  to  liquidate  as  soon  as  practicable  its 
long-term  engagements.  This  was  the  reason  why  soon 
after  its  foundation  it  passed  quite  successfully  the  crisis 
of  1857,  and  was  able  during  that  time  to  render  effective 
aid  both  to  its  clients  as  well  as  to  various  corporations 
and  other  banks. 

From  the  outset  its  reports  contained  many  more  par- 
ticulars regarding  its  operations  than  those  of  almost  any 
other  bank.  This  is  especially  true  of  the  information — 
given  regularly  up  to  1900 — regarding  the  composition  of 
its  security  holdings  and  its  syndicate  participations.469 

It  was  shown  before  that  during  the  first  period  it  took 
a  most  prominent  part  in  the  construction  of  the  German 
private  railways,  in  the  underwriting  of  a  large  number  of 
state  and  communal  loans,  and  in  promoting  the  rapidly 
developing  industry.  It  may  be  said  that  during  the 
first  period,  and  to  a  large  extent  even  in  the  beginning  of 
the  second  period,  it  was  almost  exclusively  a  bank  for 


498 


The     German     Great    Banks 


industrial  promotions  and  only  to  a  small  extent  a  bank 
for  the  emission  of  state,  communal,  and  railway  securities. 
During  the  first  epoch  the  bank,  or  at  least  its  central 
office,  made  but  few  systematic  efforts  to  develop  its. cur- 
rent-account business.  Its  industrial  connections  origi- 
nated during  those  years  mainly  from  its  emissions  of 
industrial  securities,  mainly  industrial  shares,  which  the 
bank  from  the  outset  retained  in  large  blocks,  thus  preserv- 
ing a  permanent  influence  on  the  administration  of  the 
enterprises.  This  policy,  while  frequently  the  cause  of 
heavy  losses,  on  the  other  hand  enabled  the  bank  to  keep 
a  constant  watch  over  those  industrial  undertakings 
which  it  had  founded  or  transformed  into  stock  com- 
panies. We  showed  above  that  during  the  single  year 
1856  it  founded  seven  industrial  companies,  in  which  it 
retained  a  permanent  participation  extending  to  about 
one-third  of  the  entire  share  capital,  or  about  800,000 
florins.  Since  these  holdings  resulted  not  from  emissions, 
but  from  promotions,  it  may  be  said  that  it  engaged 
designedly  in  entrepreneur  activity,  the  risks  of  which, 
it  is  true,  were  somewhat  lessened  by  its  continuous  regard 
for  the  liquidity  of  its  resources,  but  which,  nevertheless, 
were  quite  apparent. 

Neither  did  it  make  systematic  efforts  to  foster  the 
deposit  business  during  the  first  period  and  even  during 
a  considerable  part  of  the  second  period,  for  general  rea- 
sons similar  to  those  which  are  stated  in  the  1850  report 
of  the  Schaaffhausen'scher  Bankverein.  (See  pp.  73  and 
74.)  The  bank  proposed  to  carry  on  its  business,  as  far  as 
practicable,  with  its  own  means,  and  in  the  interest  of 
the  safety  of  the  institution  did  not  regard  it  expedient 


499 


National     Monetary     Commission 

to  "bring  about  an  increase  of  deposits  by  holding  out 
more  attractive  terms."  It  was  shown,  however,  that  in 
the  beginning  of  the  second  period  its  deposits  amounted 
to  about  11,000,000  florins,  as  against  only  2,000,000 
marks  in  the  case  of  the  Disconto-Gesellschaft  and  about 
2,500,000  marks  in  the  case  of  the  A.  Schaaffhausen'scher 
Bankverein.  This  relatively  large  amount  most  likely 
resulted  from  its  close  connections  with  various  railway 
companies,  such  as  the  Hessian  Ludwig  Railroad  Com- 
pany, and  from  the  credits  on  current  account  of  large 
corporations  and  firms. 

It  was  only  in  1900,  or  much  later  than  the  other  banks, 
that  the  Darmstadter  Bank  resolved  upon  the  founding 
of  deposit  offices  and  thus  upon  a  systematic  fostering  of 
the  deposit  business.  But  meanwhile  the  other  banks 
had  gained  a  considerable  start  and  secured  a  growing 
number  of  permanent  and  reliable  investors  for  the  se- 
curities emitted  by  them  and,  what  is  more  important, 
an  ever-enlarging  circle  of  current- account  depositors. 

To  the  credit  of  the  bank  it  may  be  stated  that  it  re- 
frained from  issuing  long-term  bank  obligations.  The 
charter  of  the  Darmstadter  Bank,  following  the  model 
of  the  Credit  Mobilier,  provided  for  the  issue  of  such  bank 
obligations  which,  secured  indirectly  by  the  newly  cre- 
ated industrial  enterprises,  were  to  combine  the  scat- 
tered small  capitalist  forces  in  the  launching  of  large 
enterprises. 

The  Darmstadter  Bank  as  a  rule  kept  aloof  from  exces- 
sive speculative  dealings,  except  in  a  few  cases,  when  it 
was  subjected  to  particularly  vehement  criticism.  Thus 
during  the  first  period  it  lost  heavily,  having  like  many 


500 


The    German     Great    Banks 

other  banks  become  involved  in  speculative  contango 
and  share  transactions,  which  about  the  same  time,  i.  e., 
in  1857,  were  compensated  by  improper  profits  from  the 
trading  in  its  own  scrip  (Berechtigungsscheine) ,  the  so- 
called  Darmstddter  Enkel.470 

Even  during  the  earlier  period  the  bank  took  a  con- 
siderable part  in  the  foreign  business  in  Italy,  Belgium, 
and  more  particularly  in  Austria-Hungary,  where  in  the 
beginning  of  the  sixties,  jointly  with  the  Rothschilds 
and  the  Kr edit anst alt,  it  had  engaged  in  Austrian  state 
and  railroad  finance  operations,  though  joining  the 
Rothschild  syndicate  only  some  time  later.  As  a  result 
of  these  and  similar  financial  operations  it  felt  constrained 
as  early  as  1855  to  have  its  capital  of  10,000,000  florins 
fully  paid  up  (only  4,000,000  florins  having  been  paid  in 
up  to  that  time),  and  to  increase  it  to  25,000,000  florins 
in  1856.  On  the  other  hand,  in  1857,  when,  according  to 
the  by-laws  adopted,  the  capital  was  to  undergo  a  fur- 
the'r  increase  to  the  maximum  of  50,000,000  florins,  the 
increase  was  effected  only  to  the  infinitesimal  extent  of 
additional  46,000  florins,  a  larger  issue  being  headed  off 
by  the  crisis  of  that  year. 

The  function  of  its  offices  in  Frankfort-on-the-Main 
(agency  opened  in  1854)  and  in  Mainz  (branch  opened  in 
1854)  was  to  foster  more  largely  than  could  be  done  by 
the  central  office  in  Darmstadt  the  bill  and  draft  busi- 
ness and  especially  the  current-account  business.  Until 
the  eighties  and  even  later  the  bank  was  extremely  con- 
servative in  granting  acceptance  credit,  so  much  so  that 
during  the  middle  of  the  seventies  the  acceptance  obli- 


National    Monetary     Commission 

gallons  of  the  Berlin  office  and  of  the  branch  at  Frank- 
fort-on-the-Main  amounted  to  only  a  few  million  florins. 

For  the  promotion  of  domestic  and  more  especially 
foreign  business  relations,  a  large  number  of  commandites 
were  founded,  which  did  not,  however,  justify  expecta- 
tions, as  they  proved  to  be  in  advance  of  the  time. 

As  early  as  1854  the  first  commandite  in  New  York 
was  formed  with  the  firm  G.  vom  Baur  &  Co.,  in  1857  the 
first  commandite  in  Paris,  and  in  1867  a  commandite  in 
Vienna  with  the  firm  Dutschka  &  Co.  The  establish- 
ment of  other  commandites  was  planned  in  London,  -St. 
Petersburg,  Prague,  and  even  in  Smyrna  and  Const anti* 
nople,  but  these  plans  failed  of  realization  partly  because 
of  the  unpropitious  times,  partly  also  because  of  legal 
difficulties.  At  all  events  the  Darmstadter  Bank  may 
claim  to  have  proceeded  first  designedly  in  this  field  in 
accordance  with  the  program  laid  down  in  its  very  first 
report  for  the  year  1853,  which  stated  among  others 
"that  the  bank's  organs  both  at  home  and  abroad  were 
to  facilitate  the  export  trade  as  well  as  the  innumerable 
relations  of  German  industry  to  the  money  market." 

How  far-reaching  the  plans  of  some  people  were  even 
in  those  early  days  may  best  be  seen  from  the  fact  that  in 
1856  two  of  the  founders  and  members  of  the  supervisory 
council  of  the  Darmstadter  Bank — Gustav  V.  Mevissen 
and  Abraham  Oppenheim — quite  seriously  sounded  the 
Disconto-Gesellschaft  whether  it  would  not  be  advisable 
to  organize  jointly  a  central  bank  for  foreign  commandites 
with  a  capital  of  about  100,000,000  thalers,  whose  function 
it  should  be  "to  prevent  in  the  future  the  scattering  of  the 
capital  of  those  German  banks  which  strove  after  foreign 


502 


The     German     Great    Banks 

commandite  connections  and  to  bring  about  the  most 
competent  possible  representation  of  their  interests."471 

With  the  view  of  decentralizing  its  business,  the  bank 
from  the  early  years  until  the  nineties  preferred  the  com- 
mandite system  to  the  establishment  of  branches.  This 
is  largely  accounted  for  by  the  unsatisfactory  experience 
it  had  had  with  some  of  its  branches  founded  about  the 
end  of  the  fifties  and  the  beginning  of  the  sixties.  In 
1863,  "in  order  to  reduce  the  number  of  institutions 
whose  operations  might  lead  to  direct  commitments  of  the 
bank, "  it  thought  it  necessary  to  transform  its  branch 
at  Mainz  into  a  commandite.  It  was  only  in  1 890  that  it 
parted  with  this  principle  by  opening  a  branch  at  Han- 
over, shortly  afterwards  followed  by  another  in  Strassburg 
(in  Alsace).  At  that  time  it  still  had  8  commandites  in 
Heilbronn,  Mainz,  Dresden,  Halle,  Mannheim,  Bucharest, 
Berlin,  and  Neustadt,  while  in  1909  this  number  had 
fallen  to  3. 

The  average  rate  of  dividend  for  the  period  1854-1862 
was  6}^  per  cent. 

Between  1863-1872  the  bank  took  over  independently 
many  German  and  foreign,  including  several  Russian 
and  Italian  state  bond  issues,  and  participated  in  other 
similar  transactions.  Its  main  activity,  however,  con- 
sisted in  the  financing  and  the  construction  of  the  German 
and  Austro-Hungarian  railway  systems,  among  others 
the  financing  of  the  Gotthard  Railway.  During  that 
period  it  also  founded  a  number  of  subsidiary  banks 
(Tochterbankeri) ;  for  instance,  the  Amsterdamsche  Bank 
(in  1871),  the  Suddeutsche  Bodenkreditbank,  the  Sud- 
deutsche  Immobilien-Gesellschaft,  the  Ungarische  Escompte- 


503 


National     Monetary     Commission 

und  Wechslerbank  in  1877,  and  the  Deutsche  Gold-  und 
Silber-Scheide-Anstalt,  preceded  by  the  foundation  of  the 
Hessian  Note  Bank  (Bank  fur  Suddeutschland) . 

The  average  dividend  for  the  period  1863-1872 
amounted  to  8.7  per  cent. 

During  the  following  decade,  1873-1882,  after  safely 
passing  through  the  crisis  of  1873,  finance  operations 
in  Austrian  and  German  railway,  state,  and  communal 
securities  were  effected,  while  beginning  with  1879  the 
conversion  of  German  state,  railway,  and  municipal 
debentures  was  started,  which  attained  increasingly  large 
proportions  in  the  following  years. 

The  average  rate  of  dividends  for  that  decade  (1873- 
1882)  was  8^  Per  cent. 

As  a  result  of  the  state  purchase  of  the  railroads  in 
Germany  and  Austria  the  finance  transactions  with  large 
railway  companies  greatly  diminished.  Instead,  the 
bank,  first  among  the  great  banks,  during  the  decade 
1883-1902,  in  conjunction  with  the  railway  constructing 
and  operating  concern  Herrmann  Bachstein,  undertook 
on  a  large  scale  the  construction,  operation,  and  financing 
of  the  so-called  minor  railways  (Kleinbahneri) ,  in  the  first 
place  in  Hesse,  Baden,  and  Thuringia.  The  same  period 
witnesses  the  founding  by  the  bank  of  several  industrial 
companies  and  the  participation  in  the  underwriting  of  a 
number  of  state  and  communal  issues  and  in  the  fusion 
of  the  Jura-Berne-L,ucerne  Railway  with  the  Swiss  Western 
Railway.  During  these  years  the  bank  jointly  with  a 
number  of  other  banks  and  banking  firms  took  over  the 
issue  of  the  Lisbon  municipal  and  Portuguese  state  loans. 
Apart  from  the  Lisbon  municipal  loan,  interest  on  which 


504 


The     German     Great    Banks 

has  been  regularly  paid,  the  other  loans  proved  a  source 
of  great  losses  and  annoyance  to  the  bank  and  greatly 
hampered  its  subsequent  activity,  inasmuch  as  the  bank 
felt  in  honor  bound  to  mitigate,  as  far  as  practicable,  the 
consequences  of  the  defaults  on  the  part  of  the  State  and 
railways,  with  regard  to  the  holders  of  the  state  and 
railroad  securities. 

The  average  rate  of  dividends  during  that  decade 
(1883-1892)  was  below  yX  per  cent. 

During  the  following  decade  (1893-1902)  its  activity 
became  concentrated  chiefly  in  the  field  of  minor  rail- 
ways. In  1895  it  took  a  leading  part  in  the  founding  of 
the  Suddeutsche  Eisenbahngesellschaft.  This  company 
amalgamated  the  small  railways  which  had  been  com- 
pleted by  that  time  and  on  the  whole  were  then  in  a  fair 
financial  condition.  The  bank  also  had  a  hand  in  a 
number  of  state  and  municipal  issues  and  of  industrial 
real  estate  transactions. 

About  the  end  of  the  decade  the  bank  derived  con- 
siderable profits  from  a  number  of  reorganizations  of  sev- 
eral banking  and  industrial  concerns  such  as  the  Deutsche 
Grundschuldbank,  the  Preussische  Hypotheken-Aktien- 
bank,  the  Pommersche  Hypothekenbank,  and  the  mining 
and  iron  works  Differdingen-Dannenbaum,  also  from 
taking  over  in  1902  the  Bank  fur  Suddeutschland  and  the 
Breslauer  Disconto-Bank.  About  the  same  time  it  en- 
tered into  a  community  of  interest  with  the  Osibank  fur 
Handel  und  Gewerbe  in  Posen. 

Notwithstanding      all     these     multifarious     activities 
the  average  dividend  rate  for  the  decade  was  but 
per  cent. 


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National    Monetary     Commission 

During  the  most  recent  period  the  bank  paid  special 
attention  to  the  fostering  of  the  current-account  and 
deposit  business.  Its  efforts  in  this  field  proved  emi- 
nently successful,  so  much  so  that  by  skilful  management 
it  was  able  to  restore  the  liquidity  of  its  resources,  which 
had  become  temporarily  impaired.  As  a  member  of  the 
Loewe  group  it  participated  in  all  the  enterprises  of  that 
combination.  It  also  took  part  in  a  number  of  state  and 
municipal  loans  as  well  as  in  several  industrial  issues.  In 
1905  it  established  community-of-interest  relations  with 
the  Bayerische  Bank  fur  Handel  und  Industrie. 

The  number  of  its  deposit  offices  at  the  end  of  1908 
was  39,  exclusive  of  7  agencies. 

In  1900  it  strengthened  its  foreign  connection?  by  the 
founding  of  the  Bankers'  Trading  Syndicate  in  London , 
in  1902  by  entering  into  close  relations  with  the  Wechsel- 
stuben-Aktiengesellschaft  Merkur  in  Vienna,  and  in  1903 
by  establishing  community-of-interest  relations  with  the 
Nordwestdeutsche  Bank  in  Bremen.  During  the  years 
1904-5  it  participated  in  the  transformation  of  its 
former  commandite  in  Bucharet  into  a  stock  company, 
which  assumed  the  firm  name  Banca  M armor osch  Blank 
&  Co.,  Societate  anonima.  During  the  same  period  it 
absorbed  the  banking  firm  Rob.  Warschauer  &  Co.,  which 
had  important  foreign  business  connections,  especially  in 
Russia,  and  in  which  it  had  held  a  silent-partnership 
interest  since  1898. 

In  1889  the  bank  participated  in  the  founding  of  the 
Deutsch-Asiatische  Bank;  in  1898,  jointly  with  other 
domestic  and  foreign  institutions,  it  took  a  prominent  part 
in  the  founding  of  the  Banque  Internationale  de  Bruxelles. 

506 


The     German     Great    Banks 

During  the  years  1898-1908  it  cooperated  in  the  launch- 
ing of  the  German  Telegraph  and  Cable  companies,  in 
1899  in  the  founding  of  the  two  Shantung  companies,  and 
in  1 906  in  the  organizing  of  the  Karne'run  Railway  Com- 
pany. 

In  1906,  jointly  with  several  domestic  and  foreign 
banks,  it  founded  the  Amerika-Bank  for  promoting  busi- 
ness relations  with  the  United  States.  This  institution, 
however,  was  placed  in  liquidation  in  1909. 

It  may  be  said  in  conclusion  that  the  Darmstadter 
Bank  from  the  very  beginning  acquired  a  high  standing 
among  large  circles.  Its  management,  while  not  always 
following  a  uniform  business  policy,  adhered,  however, 
almost  steadily  to  the  principle  laid  down  in  paragraph  10 
of  its  first  by-laws.472  As  a  result,  it  continued  to 
enjoy  public  confidence  in  an  undiminished  degree,  at 
first  in  southern  Germany  and  subsequently  in  the  whole 
country,  even  during  times  which  proved  critical  for  many 
commercial  undertakings  and  banks. 

THE  A.  SCHAAFFHAUSEN 'SCHER  BANKVEREiN.473 

This  institution  is  the  oldest  German  credit  bank.  Its 
foundation  dates  back  to  the  year  1848,  when  it  super- 
seded the  banking  firm  A.  Schaaffhausen,  which  at  that 
time  had  become  involved  in  financial  difficulties.  The 
capital  of  the  reorganized  institution  was  fixed  at  5 , 1 87,000 
thalers,  of  which,  however,  only  3,199,800  thalers  were 
paid  in.  As  the  firm  A.  Schaaffhausen  had  maintained 
extensive  industrial  connections  in  Rhineland- Westphalia, 
the  new  institution  was  in  a  more  favorable  situation  than 
the  other  present-day  great  banks,  which  were  able  to 

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National    Monetary     Commission 

acquire  a  steady  clientele  only  after  years  of  laborious 
efforts.  Its  primary  task  was  to  maintain  and  develop  the 
connections  of  the  old  and  well-renowned  banking  firm, 
whose  clientele  it  had  taken  over,  by  means  of  trans- 
forming industrial  undertakings  into  stock  companies  or 
otherwise  to  mobilize  the  industrial  participations  in  which 
the  capital  of  the  old  firm  had  been  tied  up,  and  to  liqui- 
date them  as  soon  as  the  profitableness  of  the  under- 
takings and  general  business  and  market  conditions 
would  permit  such  action. 

On  pages  71  and  following  we  enumerated  a  long  list  of 
transformations  and  new  foundations,  effected  by  the  A. 
Schaaffhausen'scher  Bankverein  during  the  years  1851- 
1858:  We  mentioned  there  that  from  the  outset  the  far- 
sighted  and  expert  management  of  the  institution  recog- 
nized clearly  "that  the  permanent  success  of  the  Bank- 
verein was  inseparable  from  the  prosperous  growth  of 
Rhenish  industry  in  all  its  branches . ' '  Subsequent  develop- 
ment fully  proved  the  soundness  of  its  position.  The  A. 
Schaaffhausen'scher  Bankverein  has  grown  great  with  the 
surprisingly  rapid  and  strong  development  of  the  Rhenisch- 
Westphalian  industry,  which  until  the  most  recent  period 
has  been  furnishing  the  very  core  of  its  industrial  clientele. 

The  careful  fostering  of  the  current-account  and  under- 
writing business  was  a  natural  corollary  of  its  industrial 
connections  and  the  necessity  to  extend  and  strengthen 
these  connections.  The  same  can  not  be  said  of  the  deposit 
business,  to  which  the  Bankverein  paid  no  systematic 
attention  during  the  first  period  for  general  reasons  men- 
tioned in  the  chapter  relating  to  the  Darmstadter  Bank. 
As  a  matter  of  fact,  its  total  deposits  about  the  end  of  the 


508 


The     German     Great    Banks 


first  period,  in  1869,  amounted  to  883,616  thalers  only. 
The  founding  of  branches,  agencies,  and  commandites 
contemplated  as  early  as  1853  did  not  at  first  materialize. 
Neither  did  the  bank  succeed,  as  it  then  intended,  in  open- 
ing a  branch  in  Berlin,  as  such  action  presupposed  a  change 
of  its  by-laws,  for  which  the  then  required  state  sanction 
could  not  be  obtained.  The  Bankverein  passed  through 
the  crisis  of  1857  without  being  compelled  to  cancel  any 
outstanding  credits. 

During  the  first  epoch,  while  manifesting  great  activity 
in  the  founding  and  transforming  business,  it  figured  to  a 
relatively  small  extent  in  the  underwriting  field,  though 
participating  in  numerous  syndicates  organized  during 
that  period  by  other  banks. 

Even  during  the  second  period  the  Bankverein  was  an 
"industrial"  rather  than  an  "emission"  bank.  At  the 
same  time  it  was  careful  enough  not  to  permit  any  undue 
swelling  of  its  acceptance  account.  Having  its  central 
field  of  activity  in  the  domain  of  the  rapidly  developing 
Rhenish- Westphalian  industry,  its  importance  during  the 
second  period  as  an  industrial  bank  became  preeminent. 
Owing  to  its  old-established  industrial  .connections,  it 
continued  during  all  stages  and  changes  of  business,  not- 
withstanding severe  competition,  as  the  foremost  industrial 
counsel,  financial  aid,  and  agent  in  the  execution  of  the 
ofttimes  ambitious  schemes  of  a  number  of  industrial 
establishments.  Foremost  among  the  latter  is  the  Harder 
Bergwerks-  und  Huttenverein,  founded  as  a  stock  company 
in  1852,  whose  rapid  growth  up  to  1873  an^  financial 
troubles  after  1873  claimed  the  energetic  support  of  the 
Bankverein  up  to  the  reorganization  of  the  concern  by 


509 


National    Monetary     Commissio 


n 


the  Bankverein  jointly  with  the  firm  of  Deichmann  &  Co., 
of  Cologne.  It  was  only  after  some  time  and  the  general 
improvement  of  the  business  situation  that  this  operation 
led  to  a  series  of  profitable  emissions  and  other  transac- 
tions. Even  at  present  a  director  of  the  Bankverein  is 
the  chairman  of  the  supervisory  council  of  the  Horder 
Verein,  while,  in  turn,  the  general  director  of  the  latter  is 
a  member  of  the  supervisory  council  of  the  Bankverein. 

Close  relations  were  established  with  a  number  of  large 
industrial  concerns,  such  as  the  Harpener  Bergbaugesell- 
schaft,  the  Bochumer  Verein,  the  Phoenix  and  the  Hoesch 
steel  works.  This  necessitated  the  increase  of  the  re- 
sources of  the  bank,  and  thus  fostered  its  concentration 
tendencies.  Both  in  the  interest  of  successful  industrial 
issues  as  well  as  for  other  reasons  to  be  considered  later 
closer  relations  with  the  leading  bourse  center  became 
necessary.  It  was  only  in  1891,  however,  that  the  Bank- 
verein established  such  relations  by  opening  a  branch  in 
Berlin.  Notwithstanding  this  action,  the  Bankverein  by 
no  means  became  a  Berlin  great  bank.  It  preserved  its 
essential  character  of  a  Rhenish  great  bank,  though  its 
importance  at  the  new  center  grew,  as  a  matter  of  course, 
with  the  absolute  and  relative  growth  of  the  branch,  in 
contradistinction  to  the  Darmstadter  Bank,  which  by 
shifting  its  center  of  activity  from  the  commercially  unim- 
portant town  of  Darmstadt  to  Berlin  became  to  all  intents 
and  purposes  a  Berlin  great  bank,  the  more  so  as  with  the 
further  growth  of  its  business  its  clientele  gradually  ceased 
to  be  exclusively  or  mainly  south  German. 

In  proportion  as  the  tasks  of  the  Bankverein  in  the  field 
of  industrial  credit  and  issues  grew  in  size  and  number  it 
had  to  increase  in  comparatively  rapid  succession  its  paid-in 


510 


The     German     Great    Banks 

capital  from  9,600,000  marks  to  36,000,000  in  1880,  to 
60,000,000  in  1895,  and  to  145,000,000  at  the  end  of  1905. 

During  the  second  period  it  joined  the  concentration 
movement  by  the  opening  of  branches,  which  numbered 
10  at  the  end  of  1908,  and  of  deposit  offices,  the  number  of 
which  increased  to  13  during  the  same  time;  also  by  the 
establishment  of  a  subsidiary  bank  (Tochterbank) ,  the 
Westfalisch-Lippische  Vereinsbank,  Aktiengellschaft  in 
Bielefeld,  and  finally  by  the  absorption  of  several  banks 
and  banking  houses.  It  has  only  one  commandite  (in 
Dresden) ,  and  after  the  dissolution  of  the  community  of 
interest  with  the  Dresdner  Bank  maintains  such  relations 
at  present  only  with  the  Pfdlzische  Bank  in  Ludwigshafen 
(1901)  and  the  Mittelrheinische  Bank  in  Coblenz  (1903). 

From  what  has  been  said  heretofore  it  may  be  seen  that 
the  Schaaffhausen'scher  Bankverein  possesses  no  extensive 
international  connections.  This  probably  was  one  of  the 
main  reasons  which  induced  it  to  establish  the  community 
of  interest  with  the  Dresdner  Bank,  which  maintains  a 
large  number  of  such  connections.  This  community  of 
interest  became  effective  January  i,  1904,  for  a  term  of 
thirty  years,  but  was  essentially  terminated  January  i, 
1909.  One  result,  however,  of  the  temporary  combination 
was  that  the  Bankverein  had  to  take  part  in  the  common 
foreign  enterprises  of  the  other  great  banks,  such  as  the 
Deutsch-Asiatische  .Bank,  the  Banca  Commerciale  Italiana, 
and  to  take  even  a  leading  part  in  the  establishment  of 
the  telegraph  and  cable  companies.  It  also  participated 
in  the  founding  of  the  Banque  Internationale  de  Bruxelles, 
the  Shantung  companies,  and  the  Kamerun  Railway  Com- 
pany, and  jointly  with  the  Dresdner  Bank  in  the  founding 


National    Monetary     Commission 

of  the  Deutsche  Orient  Bank  and  the  Deutsch-Sudameri- 
kanische  Bank. 

The  special  domain  of  the  Bankverein  is,  however,  the 
industrial  field,  especially  that  of  the  Rhenish-Westphalian 
district.  It  is  particularly  interesting  and  instructive  to 
observe  the  various  types  of  relations,  as  were  shown  by 
the  example  of  the  Horder  Verein,  which  the  bank  formed 
during  the  second  period. 

The  bank  as  a  rule  and  with  good  reasons  avoided 
permanent  large  participations  in  industrial  enterprises. 
Its  holdings  of  the  stock  of  the  Internationale  Bohr-Gesell- 
schaft  (International  Exploration  Company)  at  Krkelenz — 
devised  to  continue  indefinitely — can  hardly  be  regarded 
an  exception,  since  it  needed  this  stock  to  support  its 
industrial  policy  in  various  directions,474  as,  for  instance,  the 
maintenance  of  its  influence  in  the  second  coal  syndicate, 
the  penetration  into  various  mining  branches  in  Germany 
and  foreign  countries,  especially  in  Belgium,  and,  finally, 
for  the  purpose  of  developing  the  Roumanian  petroleum 
business,  entered  into  jointly  with  the  Dresdner  Bank. 
(See  above,  p.  419.)  These  latter  connections  brought 
it  into  contact  with  Silesian  industrial  interests,  likewise 
interested  in  the  Roumanian  petroleum  fields.  The  result 
was  a  new  combination  in  1904,  which  included,  beside  the 
interests  named,  also  the  Dresdner  Bank,  the  International 
Exploration  Company,  and  became  known  as  the  Petro- 
leum Stock  Company  Regatul  Romana. 

The  Bankverein  also  took  a  leading  position  in  the  group 
of  the  Elektrizitats-Gesellschaft  normals  Schuckert  &  Co. 
until  1898,  when  it  withdrew,  having  failed  in  its  efforts  to 
bring  about  the  amalgamation  of  the  above  group  with 


The     German     Great    Banks 

the  Loewe  group.  It  was  only  in  1903  that  a  combination 
with  the  Siemens  &  Halske  group  was  effected.  Since 
1898  the  Bankverein  participated  in  all  the  enterprises 
and  transactions  of  the  Loewe  group,  viz,  the  British 
Thomson- Houston  Company,  the  Benrath  Machine  Works, 
the  stock  company  Boehler  Bros.  &  Co.,  etc.  The  A.  E.  G. 
(Allgemeine  Elektrizitats-Gesellschaff)  group  and  its  activity 
assumed  larger  proportions  in  1904  by  the  accession  of  the 
banks  forming  the  I^oewe  group,  after  the  taking  over  of 
the  U.  E.  G.  (Union  Elektrizitats-Gesellschaff)  by  the 
A.  E.  G. 

As  a  result  of  its  connection  with  the  Dresdner  Bank, 
the  Bankverein  was  brought  into  contact  with  various 
transportation  companies,  in  the  first  place  with  the 
Great  Berlin  Street  Railway  Company.  It  also  became 
connected  with  the  Aktiengesellschaft  fur  Verkehrsivesen 
(Stock  Company  for  Transportation  Enterprises)  Lenz 
&  Co.,  and  the  Bank  fur  Deutsche  Eisenbahnwerte  (Bank 
for  German  Railway  Securities).  It  was  these  corpora- 
tions which  for  several  operations  brought  about  the  joint 
action  of  the  Bankverein  with  the  close  ally  of  the  Lenz  & 
Co.  concern,  the  Berliner  Handelsgesellschaft.  Jointly 
with  the  latter  it  founded  in  1895  the  Westdeutsche  Eisen- 
bahngesellschaft,  which,  in  turn,  organized  the  Vereinigte 
Westdeutsche  Kleinbahn  Aktien-Gesellschaft  (United  West 
German  Minor  Railways  Stock  Company)  with  a  capital 
of  6,000,000  marks,  and  in  1896  the  Bank  fur  Deutsche 
Eisenbahnwerte  with  a  capital  of  10,000,000  marks. 

Through  its  current-account  business  the  Bankverein 
as  a  matter  of  course  came  to  arrange  for  and  undertake 
the  transformation  into  stock  companies  of  industrial 

90311°— ii 34  513 


National    Monetary     Commission 

undertakings  of  its  customers.  Under  this  head  fall  the 
transformation  of  the  firm  Carl  von  Born  into  the 
Hutten-Aktiengesellschaft  normals  Carl  von  Born  at  Dort- 
mund in  1896;  of  the  firm  Bucklers  &  Jannsen  into  the 
Dulkener  Baumwollspinnerei  A .  G.  (Duelken  Cotton  Spin- 
ning Stock  Company) ;  of  the  firm  Burtscheid,  Ulrici  &  Co. 
in  Dulken  into  the  Rheinische  Webstuhlfabrik  A.  G. 
(Rhenish  Weaving  Looms  Manufacturing  Stock  Company) , 
in  1897;  and  of  the  firm  Mannstaedt  &  Co.  into  the  Kalker 
Walzwerk  (Kalk  Rolling  Mills)  Mannstaedt  &  Co.  in  1898. 
Other  operations  of  the  Bankverein  originating  in  the 
same  manner  were:  A  commandite  interest  acquired  hi 
the  firm  C.  Luckerath  (Limited),  cloth  dealers,  the  trans- 
formation of  the  Siegrheinische  Gewerkschaft  (Sieg-Rhine 
Mining  Concern  (Limited),  into  a  stock  company  (1897); 
the  transformation  of  the  Selbecker  Bergwerksverein  into  a 
limited  mining  company  (Gewerkschaft) ;  the  taking  over 
in  1901  of  the  bankrupt  worsted  spinning  works,  Eitorf, 
Karl  S chafer  &  Co.,  and  its  immediate  transformation 
into  the  Worsted  Spinning  and  Weaving  Works  Eitorf 
Stock  Company,  and  the  reorganization  of  the  machine 
tool  factory,  de  Fries  &  Co.,  stock  company,  in  Heerdt 
near  Dusseldorf.  In  the  same  class  belong  the  amalga- 
mation of  two  friendly  concerns  into  the  United  Steel- 
works von  der  Zypen  and  the  Wissen  Iron  Mills  Stock  Com- 
pany, and  the  union  of  the  works  of  two  of  its  current- 
account  customers  into  the  Eschweiler-Koln  Eisenwerke 
Aktien-Gesellschaft.475  In  1 904  the  Bankverein,  in  the  inter- 
ests of  its  clients,  the  Kolnische  Maschinenbau-Aktien- 
gesellschaft  in  Cologne- B ay enthal,  for  the  purpose  of 
settling  the  deficit  in  its  balance  sheet,  purchased  jointly 


514 


The     German     Great    Banks 

with  other  firms  certain  grounds  owned  by  the  works  and 
transferred  them  to  a  newly  formed  real  estate  company.476 

In  connection  with  the  operations  just  described,  a 
number  of  other  transactions  were  effected  partly  in 
the  interests  of  the  bank  itself,  partly  in  the  interests  of 
friendly  business  houses,  as  for  instance,  the  sale  of  its 
participation  in  the  above-mentioned  Hutten-Aktiengesell- 
schaft  normals  Carl  -von  Born  in  Dortmund  to  the  likewise 
mentioned  Horder  Verein. 

i  The  number  of  industrial  issues  of  the  Bankverein 
during  the  years  1895-1903  amounted  to  187,  as  com- 
pared with  220  effected  by  the  Dresdner  Bank,  170  by 
the  Berliner  Handelsgesellschaft,  151  by  the  Disconto- 
Gesellschaft,  150  by  the  Deutsche  Bank,  and  148  by  the 
Darmstadter  Bank.  Among  the  187  industrial  issues 
of  the  Bankverein  103  were  those  of  industrial  bonds.477 
The  number  of  companies  for  which  the  Bankverein  ef- 
fected industrial  issues  during  the  period  1895-1903  was 
207,  compared  with  181  served  in  this  manner  by  the 
Dresdner  Bank,  154  by  the  Disconto-Gesellschaft,  149  by 
the  Berliner  Handelsgesellschaft,  140  by  the  Darmstadter 
Bank,  and  139  by  the  Deutsche  Bank.  It  is  seen  that  in 
this  field  the  Bankverein  attained  the  highest  record. 

Of  the  various  industries  the  Bankverein  has  been  in 
closest  touch  with  the  mining  and  smelting  industries. 
As  shown  above,  it  maintained  particularly  intimate  re- 
lations with  the  Horder  Verein  in  Dortmund,  also  with 
the  Lothringischer  Huttenverein  Aumetz-Friede  in  Kneut- 
tingen,  which  it  reorganized  in  1901  and  again  in  1903, 
and  which  was  amalgamated  in  the  same  year  with  the 
Fentscher  Hutten-Aktienverein.  The  indirect  consequence 


National    Monetary     Commission 

of  these  close  relations  was  that  the  Aumetz-Friede 
works  ordered  its  machinery  from  a  client  of  the  Bank- 
verein,  the  Cologne  Machine  Construction  Stock  Company, 
a  practice  which  is  often  found  among  customers  of  the 
same  bank.  The  Bankverein  maintained  also  close  rela- 
tions to  the  Harpen  Mining  Company,  which  it  had  founded 
jointly  with  the  Berliner  Handelsgesellschaft,  the  iron 
works  Phoenix  in  Laar,  the  Hosch  Steel  Works,  and  the 
Bochumer  Verein,  and  through  its  connections  with  the 
firm  Spaeter  &  Co.,  part  owners  of  the  Rombacher  Hut- 
tenwerke,  with  the  latter  works. 

By  reason  of  the  above-named  and  other  close  connec- 
tions with  the  Rhenish- Westphalian  industry,  the  lead- 
ing element  in  the  coal  mining  and  metallurgical  indus- 
tries of  the  country,  the  Bankverein  came  to  play  a 
most  important  part  in  the  development  of  the  industrial 
cartels.  Thus  in  1899  it  opened  a  syndicate  office  (Syndi- 
kats-Kontor)  with  a  capital  of  i  ,000,000  marks,  which  was 
to  undertake  the  representation  of  industrial  combinations 
and  syndicates.  The  Steel  Works'  Union  was  formed  after 
hard  struggles  mainly  for  the  reason  that  the  Bankverein 
held  the  majority  of  stock  of  the  Phoenix  Works  and  was 
thus  able  to  force  a  resolution  in  the  general  meeting  of 
stockholders  to  join  the  union  against  the  wishes  of  the 
director  of  the  works. 

In  conclusion,  it  may  be  said  that  the  A.  Schaaffhau- 
sen'scher  Bankverein  from  the  start  to  the  present  day 
was  the  leading  institution  in  the  Rhenish- Westphalian 
industrial  region.  When  in  the  course  of  development 
the  policy  and  management  of  these  industries  began  to 
exercise  a  considerable  influence  on  the  other  German 


516 


The     German     Great    Banks 

industrial  districts,  the  Bankverein  in  its  capacity  as  the 
leading  institution  in  a  special  branch  of  business  gained 
also  an  influential  position  among  the  great  German  banks. 

THE  BERUNER  HANDELSGESELLSCHAFT. 

The  Berliner  Handelsgesellschaft  which  was  founded  in 
1856,  was  organized  as  a  stock  company  "  en  commandite  " 
for  the  reason  that  the  latter  form  of  organization  did  not 
require  a  state  concession  in  Prussia.  At  the  time  of  its 
organization  its  capital  stock  amounted  to  15,000,000 
thalers  (45,000,000  marks)  of  which,  however,  only 
3,740,150  thalers  were  paid  in.  Since  the  first  period  it 
has  been  a  prominent  flotation  bank  (Emissionsbank) 
with  the  result  that  in  the  matter  of  issuing  and  placing 
securities  it  may  boast  of  methods  technically  equal  if  not 
superior  to  those  used  by  any  other  bank.  As  shown 
above  (p.  75  and  following)  it  participated  during  the  first 
period  in  the  underwriting  of  a  large  number  of  domestic 
and  foreign  state  and  railway  loans,  including  the  issue  of 
Russian  railway  bonds. 

In  section  2  of  its  constitution  it  was  expressly  stated 
that  its  activities  should  comprise  especially  "industrial 
and  agricultural  enterprises,  mining,  smelting,  the  con- 
struction of  canals,  highways,  and  railways,  as  well 
as  the  creation,  fusion,  and  consolidation  of  joint  stock 
companies  and  the  issue  of  stock  or  bonds  of  such 
companies." 

Although  during  the  earlier  period  it  ventured  but  com- 
paratively little  into  the  industrial  field  and  conducted 
neither  a  current-account  nor  a  deposit  business,  yet  it 
succeeded  in  earning  large  and  almost  steadily  increasing 


517 


National    Monetary     Commission 

gains  from  its  business  of  reorganizing  and  floating 
enterprises  and  from  its  operations  in  the  underwriting 
and  issue  field.  Its  dividends  in  the  first  period  were 
as  follows : 


Tgc7 

Per  cent. 

•  sK 

1864.  . 

Per  cent. 
8 

1858 

•  sK 

i86s.  . 

8 

l8^O 

5 

1866  

8 

i860 

•  sX 

1867.  . 

8 

1861 

c 

1868  

10 

1862 

Q 

1860 

IO 

186-?.  . 

.  8 

Negotiations  for  the  establishment  of  "  commandites  in 
other  localities,"  provided  for  in  the  by-laws  and  men- 
tioned in  the  report  for  1857,  had  to  be  abandoned  on 
account  of  the  crisis  of  i857.478 

Among  serious  losses  which  the  Handelsgesellschaft 
suffered  during  that  period  may  be  mentioned  that  of 
150,000  thalers  on  account  of  the  Dessauer  Kreditanstalt, 
or  more  correctly,  the  latter 's  New  York  commandite, 
besides  a  loss  growing  indirectly  out  of  the  failure  of  an 
export  firm  in  Danzig.  This  failure  involved  the  banking 
house  of  Breest  &  Gelpcke,  of  Berlin,  which  was  con- 
ducted on  account  of  the  Berliner  Handelsgesellschaft 
since  January  i,  1857.  No  difficulties  were  experienced 
by  the  bank  during  the  crisis  of  1857.  During  the  second 
period  the  bank  devoted  itself  systematically  and  with 
correspondingly  good  results  also  to  the  current-account 
business,  though  keeping  aloof  from  the  deposit  business. 
It  also  took  a  leading  part  during  the  first  years  in  the 
foundation  and  transformation  of  industrial  enterprises. 
These  operations,  while  a  source  of  rich  returns,  naturally 
resulted  also  in  some  losses.  In  1871  it  was  able  to 
increase  its  capital  to  10,500,000  thalers.  Its  attempts  at 


518 


The     German     Great    Banks 

enterpreneur  activity  at  the  beginning  of  the  second 
period  proved,  however,  disastrous,  as  mentioned  on  a 
previous  occasion.  The  construction  of  the  Muldetal 
Railway,  which  was  financed  by  the  bank,  consumed, 
according  to  the  report  of  1876,  a  large  part  of  its  available 
resources.  This  necessitated  a  call  for  the  payment  of  30 
per  cent  on  the  new  stock. 

The  dividends  during  the  first  thirteen  years  of  the 
second  period  were  as  follows: 


Per  cent. 

1870 9 

1871 

1872 

1873 6; 

1874 7 

1875 5 


Per  cent. 

1877 o 

1878 o 

1879 5 

1880 5*4 

1881 6 

1882. .  .  o 


1876 o   I 

The  losses  occasioned  by  the  Muldetal  Railway  enter- 
prise caused  the  passing  of  dividends  during  the  years 
1876  to  1878,  which  in  the  year  1872  were  as  high  as 
12%  per  cent;  in  fact,  they  caused  even  a  deficit. 

In  1878,  after  the  sale  of  the  railway  to  the  Saxon 
government,  which  entailed  a  loss  to  the  bank  of  6,500,000 
marks,  its  capital  stock,  which  had  grown  to  15,000,000 
thalers  (45,000,000  marks),  was  reduced  to  30,000,000 
marks,  and  the  profits  from  this  operation  were  devoted 
to  the  creation  of  a  large  special  reserve  fund  for  pending 
industrial  business.479  During  the  following  years,  1879 
and  1880,  the  bank  was  able  again  to  pay  dividends  of  5 
and  $%  per  cent,  respectively. 

During  the  year  1 880-81  the  bank  again  suffered  on 
account  of  its  participation  in  two  industrial  enterprises, 
viz:  The  Deutsche  Lokal-  und  Strassenbahngesellschaft 

519 

, 


National    Monetary     Commission 

(German  Local  and  Street  Railway  Company)  and  the 
Petroleum-Bohr-  Gerechtsamen-  und  Olland-  Gesellschaft 
(Petroleum  Drill  Privilege  and  Oil  Land  Company),  as 
well  as  on  account  of  extensive  speculations  in  shares  of 
the  bank's  own  capital  and  in  Russian  paper  currency  by 
one  of  the  partners  of  the  institution.  The  losses  resulting 
from  these  operations  necessitated  in  1882  a  reduction  of 
the  capital  stock  from  30,000,000  to  20,000,000  marks. 
The  above-mentioned  speculation  alone  entailed  a  loss 
of  8,250,000  marks. 

There  is  no  doubt  that  many  present-day  economists, 
who  on  such  occasions  as  well  as  after  every  general 
crisis  demand  government  intervention,  including  official 
supervision,  control,  and  inspection,  or  restrictive  legis- 
lation, would  at  that  time  have  seen  the  only  salvation 
in  the  carrying  out  of  similar  demands  with  regard  to  the 
Berliner  Handelsgesellschaft  and  for  that  matter  to  all 
German  credit  banks.  But  there  is  likewise  no  doubt 
whatever  that  such  measures  would  have  caused  only 
further  disaster,  and  would  have  prevented  or  restricted 
the  splendid  development  of  German  banking,  which  was 
so  very  essential  to  the  interests  of  the  nation.  In  this 
respect,  as  in  many  others,  the  practical  wisdom  of  the 
English,  resulting  from  greater  business  experience,  and 
finding  expression  in  the  maxim,  "Not  measures,  but 
men,"  has  proved  far  more  successful. 

Splendid  results  followed  the  inauguration  of  a  new 
management  by  careful  as  well  as  skilful  partners  (of 
whom  one  is  still  on  the  board  of  management)  and  the 
adoption  of  a  business  policy  based  on  new  principles, 
and  this  notwithstanding  the  fact  that  confidence  in  the 


520 


The     German     Great    Banks 

bank,  which  had  been  almost  completely  lost,  had  to  be 
regained  by  the  new  partnership. 

Even  for  the  first  year  after  the  reorganization  (1883) 
a  dividend  of  7  per  cent  could  be  declared,  and  ever  since, 
with  the  exception  of  slight  interruptions  from  time  to 
time,  due  to  general  economic  conditions,  the  Berliner 
Handelsgesellschaft  has  been  following  a  career  of  con- 
tinuous and  increasing  success. 

Its  dividends  during  the  following  years  were  as  follows: 


1883.  . 

Per  cent. 

7 

1806  .  . 

Per  cent. 

1884. 

1807 

1885  

8 

1898.  . 

1886  

1800 

Ql4 

1887.  . 

IQOO 

8 

1888  

10 

IQOI  . 

7" 

1889.  . 

12 

IQO2  .  . 

lY* 

1800.  . 

^A 

IQCK 

.  .  '      8 

1801 

nil 

IQO4. 

8 

1892  

6 

IQCK 

180^ 

5~ 

1906 

1804. 

7 

IQO7 

180.5  .  . 

8 

1008.  . 

0 

On  December  31,  1908,  the  "commandite"  capital  of 
the  Berliner  Handelsgesellschaft  was  110,000,000  marks, 
while  the  surplus  amounted  to  34,500,000  marks,  or  31 
per  cent  of  the  capital  stock.  The  debits  on  current 
account  amounted  to  192,250,000  and  the  credits  to 
206,250,000  marks. 

The  peculiar  character  of  the  Berliner  Handelsgesell- 
schaft among  the  other  great  Berlin  banks  grew  out  of  its 
relations  to: 

1.  The  electrotechnical  industry. 

2.  The  so-called  "heavy"  industries,  especially  mining 
and  smelting  enterprises.  * 


521 


National    Monetary     Commission 

3.  The  street  railways  and  minor  steam  railways. 

It  was  particularly  in  the  first-mentioned  field  that  the 
Berliner  Handelsgesellschaft  developed  a  many-sided  and 
fruitful  activity.  The  great  success  achieved  by  the  Allge- 
meine  Elektrizitdts-Gesellschaft  (General  Electric  Company) 
was  due  as  much  to  the  marvelously  efficient  management 
of  its  general  director,  Emil  Rathenau  and  his  associates, 
as  to  the  intelligent  and  skilful  financial  cooperation  of 
the  Berliner  Handelsgesellschaft.  The  latter,  as  the  chief 
financial  adviser  of  the  General  Electric  Company,  proved 
as  successful  as  did  the  Deutsche  Bank  in  the  case  of  the 
firm  of  Siemens  &  Halske. 

The  Handelsgesellschaft  undertook  a  large  number  of 
financial  transactions  of  all  sorts  as  a  result  of  its  connect- 
ion with  the  General  Electric  Company.  Aside  from  the 
numerous  issues  which  it  carried  through  for  the  General 
Electric  Company  and  other  concerns  which  were  either 
allied  with  or  subsidiary  to  it,  such  as  the  Berliner  Elek- 
trizitdtswerke ,  I  may  mention  its  organization  of  separate 
electrical  companies  in  Seville  and  Barcelona  (1894),  *n 
Warsaw  and  Bilbao  (1896),  the  foundation  of  the  Bank 
fur  Elektrische  Unternehmungen  in  Zurich  (1897);  the 
Deutsche  Ueberseeische  Elektrizitdtsgesellschaft  (German 
Transmarine  Electrical  Company)  in  Berlin,  and  the 
Aluminium-Industrie- A  ktiengesellschaft  (Aluminum  Manu- 
facturing Company)  in  Neuhausen  (1898),  the  Elektro- 
Chemische  Werke  (Electro-Chemical  Works)  in  Bitterfeld 
and  Rheinfelden  (1896),  which  were  consolidated  in  1899 
and,  finally,  the  Elektrizitdts-Lieferungs-Gesellschaft  (Elec- 
tric Light  and  Power  Company),  etc. 


522 


The     German     Great    Banks 

After  the  Union-Elektrizitats-Gesellschaft  (U.  E.  G.) 
was  taken  over  by  the  General  Electric  Company  in  the 
year  1904,  the  bank  group  which  financed  the  General 
Electric  Company  was  strengthened  by  the  alliance  with 
the  bank  group  which  financed  the  Loewe  enterprises 
(viz,  the  Disconto-Gesellschaft,  the  Dresdner  Bank,  the 
Darmstadter  Bank,  and  the  A.  Schaaffhausen'scher  Bank- 
verein).  This  group  thus  represents  an  enormous  power 
alongside  that  of  the  bank  group  headed  by  the  Deutsche 
Bank,  which  finances  the  Siemens  &  Halske  concerns  and 
the  newly  organized  limited  stock  company  (G.  m.  b.  H.) 
of  the  Siemens-Schuckert  Works,  which  grew  out  of  a 
combination  in  1 903  of  some  of  the  Siemens-Halske  works 
with  the  Schuckert  Company.  This  latter  combination 
presents  many  points  of  contact  and  common  interests 
with  the  groups  mentioned.  The  Berliner  Handelsge- 
sellschaft  is,  moreover,  represented  in  the  syndicate  for 
handling  the  Siemens  &  Halske  securities. 

In  the  " heavy"  industries,  especially  in  mining  and 
smelting,  the  Berliner  Handelsgesellschaft  also  played  an 
important  and  at  times  even  the  leading  part  alongside 
the  A.  Schaaffhausen'scher  Bankverein.  Together  with 
this  institution,  it  is  largely  interested  in  the  Harpener 
Bergbaugesellschaft  (Harpen  Mining  Company),  is  closely 
connected  with  the  Rombacher  Huttenwerke  (Rombach 
Smelting  Works) ,  and  wields  an  important  influence  in  the 
Ruhr  coal  district  through  its  intimate  connection  with 
the  Konsolidation  and  the  Hibernia  mining  companies. 
In  conjunction  with  the  banking  house  of  S.  Bleichroder 
and  other  banks,  it  succeeded  in  preventing  the  acquisition 
of  the  Hibernia  mines  by  the  Government. 


523 


National    Monetary     Commission 

The  Berliner  Handelgesellschaft,  furthermore,  is  well 
connected  with  the  Upper  Silesian  iron  and  coal  district 
through  its  close  business  relations  with  the  Oberschlesische 
Eisenindustrie-A  ktiengesellschaft  Caro-Hegenscheidt  (Upper 
Silesion  Iron  Company  Caro-Hegenscheidt)  and  the  firm 
Emanuel  Friedlander  &  Co.  in  Berlin,  one  of  the  two  sales 
agencies  of  the  upper  Silesian  coal  combination. 

Finally,  in  the  field  of  street  and  minor  railway  enter- 
prises the  activities  of  the  Berliner  Handelsgesellschaft 
had  a  particularly  wide  scope.  It  assisted  the  General 
Electric  Company  in  1895  by  the  founding  of  the  Leipzig 
Street  Railway  Company  and  through  the  issue  of  the 
securities  of  the  Karlsruhe,  Breslau  and  Stettin  street 
railway  companies  and  those  of  the  Allgemeine  Lokal-  und 
Strassenbahngesellschaft  (General  Local  and  Street  Railway 
Company).  Like  the  Darmstadter  Bank,  but  at  a  later 
date,  it  undertook  also  the  promotion  on  a  large  scale  of 
minor  railways  (Kleinbahnen) . 

In  this  field  its  relations  with  the  Stettin  Railway  Con- 
struction and  Transportation  Concern,  Lenz  &  Co.  were  as 
close  as  those  of  the  Darmstadter  Bank  with  the  firm 
Herrmann  Bachstein.  In  view  of  its  own  former  disas- 
trous experience  and  that  of  other  large  banks,  it  began 
its  activity  in  this  field  by  organizing  in  1895,  in  conjunc- 
tion with  the  A.  Schaaffhausen'scher  Bankverein,  a  trust 
company  at  Cologne,  known  as  the  Westdeutsche  Risen- 
bahngesellschaft  (West  German  Railway  Company),  which 
took  the  place  of  the  Handelsgesellschaft  in  the  operating 
and  financing  of  the  Lenz  enterprises.  In  1896  another 
trust  company,  the  Bank  fur  Deutsche  Eisenbahnwerte 
(Bank  for  German  Railway  Securities)  was  organized, 


524 


The     German     Great    Banks 

while  the  Badische  Lokaleisenbahnen-A.  G.  (Baden  Local 
Railway  Company)  was  founded  to  take  over  a  part  of  the 
Lenz  railway  system  located  in  Baden  and  the  Ostdeutsche 
Eisenbahngesellschaft  in  Bromberg  (in  1899)  to  take  over 
another  part  of  that  system.  In  1899  the  Vereinigte 
Westdeutsche  Kleinbahn-Aktiengesellschaft  (United  West 
German  Minor  Railway  Company)  was  founded,  which 
controlled  as  separate  enterprises  a  large  part  of  the  rail- 
roads of  the  West  German  Railway  Company.  In  1901 
the  Handelsgesellschaft  founded,  alongside  the  older 
limited  company,  lyenz  &  Co.,  a  new  Aktiengesellschaft  fur 
Verkehrswesen  (stock  company  for  transportation),  with 
a  capital  of  10,000,000  marks,  which  took  over  all  the  shares 
of  the  former  company.  The  Berliner  Handelsgesellschaft 
engaged,  in  a  large  measure,  also  in  speculative  dealings 
in  urban  land  tracts  (Terraingeschaft) . 

We  saw  above  (in  the  discussion  of  the  A.  Schaaff- 
hauen'scher  Bankverein,  page  515)  that  with  reference  to 
the  number  of  industrial  issues  effected  during  the  years 
1895  to  1903,  the  Berliner  Handelsgesellschaft  ranked 
third,  with  170  issues  (as  against  220  effected  by  the 
Dresdner  Bank  and  187  by  the  A.  Schaaffhausen'scher 
Bankverein) .  It  ranked  fourth  if  the  number  of  financed 
companies  is  considered,  this  number  being  149. 

It  is  also  represented  by  its  managing  partners  on  the 
supervisory  boards  of  a  large  number  of  industrial  cor- 
porations. The  international  connections  of  the  Handels- 
gesellschaft are  extensive  and  of  a  high  order.  The  com- 
pany took  a  leading  part  in  the  formation  of  the  Deutsch- 
Asiatische  Bank  in  1889  and  of  the  Banca  Commerciale 
Italiana  in  1894.  It  also  participated  during  the  years 


525 


National    Monetary     Commission 

1898  to  1904  and  in  1908  in  the  organization  of  all  the 
German  telegraph  and  cable  companies,  in  1899  in  the 
organization  of  the  two  Shantung  companies,  and  in 
1906  in  the  founding  of  the  Kamerun  Railway  Company. 

Among  its  connections  in  the  countries  of  continental 
Europe  we  may  note  the  following  institutions  in  the 
foundation  of  which  it  took  part : 

Sckweizerischer  Bankmrin  in  Basle  (1872),  the  B cinque 
Internationale  de  Bruxelles  (1898),  the  Banca  M  armor  osch 
Blank  &  Co.,  Societate  anonima  in  Bucharest  (1904-5) 
and  the  banking  company,  formerly  Andreevics  &  Co., 
in  Belgrade  (1908).  Since  1905  it  has  been  operating 
the  Usambara  Railway  in  German  East  Africa,  and 
in  conjunction  with  the  firm  of  Lenz  &  Co.  it  is  engaged 
in  -the  construction  of  the  railway  from  Luderitzbucht 
to  Kubub. 

It  participated,  in  some  cases  most  prominently,  in 
all  of  the  Russian,  Chinese,  and  Japanese  bond  issues 
effected  during  the  second  period  and  emitted  several 
Servian  state  and  railway  loans.  (See  App.  V  and  VI.) 

The  prominent  place  among  the  large  Berlin  banks 
attained  by  the  Berliner  Handelsgesellschaft  proves  in  a 
striking  way  the  truth  established  by  years  of  experience 
that  the  fate  of  banks  as  well  as  of  industrial  and  com- 
merical  enterprises  depends  chiefly  upon  the  ability  and 
trustworthiness  as  well  as  the  energy  and  farsightedness 
of  the  management. 


526 


r 


he     German     Great    Banks 


SECTION  7.  THE  SO-CALLED  EXPORT  CAPITALISM — THE  IN- 
VESTMENT OF  GERMAN  CAPITAL  IN  FOREIGN  INDUSTRIAL 
AND  COMMERCIAL  ENTERPRISES,  AND  SECURITIES.  THE 
ESTABLISHMENT  OF  SUBSIDIARY  BANKS  (ToCHTER- 
BANKEN)  EXCLUSIVELY  FOR  FOREIGN  BUSINESS,  WITH 
SPECIAL  REFERENCE  TO  ITS  CONNECTION  WITH  THE 
INDUSTRIAL  EXPORT  POLICY.480 

(A)  In  a  previous  part  (sec.  4,  sub.  i)  it  was  shown 
that  the  development  of  the  foreign,  and  especially  the 
over-sea  banking  business  during  the  second  period,481 
which  was  started  by  the  energetic  activity  of  the 
Deutsche  Bank  represents  the  outcome  of  a  well-designed 
business  policy482  on  the  part  of  the  great  German  banks 
which  is  directly  and  inseparably  connected  with  the 
general  industrial  export  policy. 

In  order  to  judge  whether  this  business  policy  has 
been  proper,  necessary,  or  desirable  from  the  point  of 
view  of  the  public  welfare,  we  must  bear  in  mind  the 
facts  presented  in  Part  III,  Chapter  I,  page  87  et  seq., 
bearing  on  the  development  of  the  general  economic 
conditions  in  Germany  during  the  second  period  (1870 
to  the  present  time). 

We  saw  that  German  agriculture  and  forestry  during 
this  period  were  not  in  a  position  to  supply  the  domestic 
demand  by  their  own  products.  We  also  know  that 
in  view  of  the  large  and  continuous  growth  of  our  popu- 
lation, notwithstanding  the  best  efforts  and  zeal,  this 
deficiency  in  the  domestic  supply  could  not  be  made 
up  by  the  application  of  more  intensive  methods  in 
agricultural  production  or  by  the  extension  of  the  culti- 
vated area.  Our  deficiency  in  agricultural  products, 


527 


National    Monetary     Commission 

therefore,  had  to  be  made  up  to  an  increasing  extent  by 
the  foreign  importation  of  foodstuffs. 

Moreover,  German  industry  was  not  in  a  position  to 
supply  its  needs  at  home,  especially  in  the  matter  of 
raw  materials,  and  was  compelled  on  the  whole — i.  e., 
apart  from  single  branches — to  supply  the  demand  for 
raw  materials  largely  and,  in  some  instances  almost  exclu- 
sively, by  importation  from  abroad. 

It  is  self-evident  that  we  can  not  pay  in  cash  for  these 
very  large  imports  of  agricultural  products  and  raw  mate- 
rials used  in  manufacture  without  impairing  our  national 
capital  resources.  These  imports  must  be  paid,  there- 
fore, in  some  other  way;  and  this  is  unavoidable,  because 
we  need  these  imports  for  the  existence  of  our  agricul- 
ture and  our  industry — that  is,  for  the  sustenance  and  the 
employment  of  our  population. 

Such  payment  has  been  made  thus  far  in  an  unimpor- 
tant degree  by  the  exchange  of  such  raw  products  as  we 
do.  not  need  for  home  consumption,  but  mainly  by  export- 
ing manufactured  products 483  to  the  countries  from  which 
we  import  foodstuffs  and  raw  products.484 

The  necessity  for  these  exports  of  manufactured  prod- 
ucts is  thus  growing  in  proportion  to  the  increasing  defi- 
ciency in  the  supply  of  domestic  foodstuffs  and  raw  mate- 
rials. Under  present  conditions,  therefore,  especially  in 
view  of  the  constantly  increasing  population,  our  indus- 
trial export  policy  can  not  be  said  to  have  been  a  device 
arbitrarily  adopted,  and  therefore  one  eventually  to 
be  abandoned.  Nor  is  it  an  end  in  itself,  but  on  the 
contrary  a  means,  indispensable  to  our  entire  economic 
existence,485  of  paying  to  a  very  material  extent  for  our 
absolutely  necessary  imports. 

528 


The     German     Great    Banks 

As  stated  before,  the  German  banks  regarded  it  as  one 
of  their  chief  functions  actively  to  support  both  at  home 
and  abroad  domestic  industry486  and  the  export  policy 
adopted  by  the  latter  by  promoting  energetically  German 
foreign  commerce.  In  connection  with  this  general  policy 
they  came  to  establish  branches  in  foreign  countries  and 
to  organize  for  the  foreign  business  special  subsidiary 
banks  both  at  home  and  abroad,  which,  it  is  true,  in  many 
cases  proved  at  the  same  time  the  means  of  securing  new 
and  profitable  business.  They  also  cooperated  with  the 
government  policies  regarding  the  colonies,  navigation, 
canals,  the  navy,  and  cable  connections,  all  of  which  bore 
the  closest  relations  to  the  above  business  policies. 

It  is  plain,  therefore,  that  the  activities  of  the  banks  in 
all  these  fields  were  of  national  importance.  For  upon 
the  successful  discharge  of  the  above  functions  depends 
not  only  the  maintenance  and  the  extension  of  our  influ- 
ence and  our  importance  abroad,  but,  what  is  more,  our 
entire  economic  existence. 

It  may  be  said  that  for  some  time  at  least  the  necessity 
of  this  development  from  the  point  of  view  of  the  com- 
mon national  interests  did  not  appeal  to  wide  circles, 
especially  to  those  classes  which  were  injuriously  affected 
by  this  development.  For  it  goes  without  saying  that  in 
i  the  course  and  as  the  result  of  the  industrial  export  move- 
!ment,  as  in  the  case  of  any  other  fundamental  economic 
i  change,  serious  disadvantages  manifested  themselves. 
^With  the  steady  growth  of  population  the  industrial  ex- 
port policy  continued  to  be  emphasized  more  and  more 
until  about  1882,  when  it  may  be  said  to  have  reached  its 
point  of  culmination.  During  all  these  years  agriculture, 

90311°— ii 35  529 


National    Monetary     Commission 

notwithstanding  all  its  importance  to  the  economic  well- 
being  of  the  nation,  received  but  scant  support,  losing 
much  of  its  former  strength,  means,  credit,  and  labor. 
It  is  that  policy  which  is  partly  responsible  for  the  fact 
that  the  percentage  of  population  engaged  in  agriculture 
decreased  from  about  61  per  cent  of  the  entire  popu- 
lation in  Prussia  in  the  middle  of  the  past  century  to  28.6 
per  cent  of  the  entire  German  population  in  1907,  while 
at  the  same  time  the  population  engaged  in  commerce  and 
industry  increased  from  about  24  per  cent  (in  the  middle 
of  the  past  century  in  Prussia)  to  56  per  cent  of  the  Ger- 
man population  engaged  in  gainful  occupations  in  1907. 
The  latter  circumstance  has  contributed  materially  to  the 
enormous  growth  of  the  manufacturing  towns  (up  to  17 
and  1 8  times  the  figures  for  the  middle  of  the  past  century) . 

(B)  The  above-mentioned  activities  represent,  how- 
ever, only  part  of  the  functions  of  the  banks  in  this 
field. 

For  as  was  made  clear  from  the  statistical  compilations, 
which  were  closely  scanned  by  the  banks  as  well,  notwith- 
standing all  efforts  in  the  fields  of  industry  and  foreign 
trade,  only  part,  though  quite  a  considerable  part,  of  our 
imports  of  foodstuffs  and  raw  materials  could  be  compen- 
sated by  means  of  exports  of  manufactures  and  similar' 
products.  After  deducting  the  value  of  our  exports  ofi 
manufactures  there  still  remained  a  very  considerable 
balance  in  favor  of  the  foreign  countries.  The  excess  of 
imports  for  consumption  over  domestic  exports  at  the 
close  of  1907,  as  we  saw  above  (p.  112),  amounted,  in  round 
figures,  to  1,300,000,000  marks.  To  this  extent,  there- 
fore, the  balance  of  trade  was  against  us. 


53° 


The     German     Great    Banks 


Now,  there  is  no  doubt  that  the  claim  that  an  unfavor- 
able balance  of  trade  in  itself  is  disastrous  for  a  country 
can  not  be  maintained  as  a  general  proposition,  since  nu- 
merous countries  may  be  cited  which  show  an  unfavorable 
balance  of  trade,  but  which  with  a  particularly  favorable 
balance  of  payments,  enjoy  the  utmost  prosperity.  These 
are  the  countries  which  utilize  the  available  surplus  of 
large  capital  accumulations,  derived  from  their  industrial, 
agricultural,  or  colonial  successes,  for  the  improvement  of 
their  balance  of  payments.  The  more  favorable  the  bal- 
ance of  payments  of  such  a  country  the  less  perilous  will 
be  an  unfavorable  balance  of  its  trade.  In  other  words, 
the  more  favorable  its  balance  of  payments  becomes,  the 
less  a  country  may  hesitate  to  let  other  countries  "work 
for  it,"  that  is  to  say,  permit  itself  to  be  supplied  by  other 
countries  with  raw  materials  and  foodstuffs,  even  though 
as  a  result  of  such  a  policy  its  balance  of  trade  may  be- 
come unfavorable.  For  Germany  the  problem  presented 
itself  of  compensating  the  unfavorable  balance  of  trade 
by  the  utmost  practicable  improvement  of  our  balance 
of  payments,  in  order  to  escape  ultimate  disaster  through 
a  constant  accumulation  of  unfavorable  trade  balances. 
In  this  respect,  as  well,  there  was  no  choice  of  means. 

The  problem  was  primarily  one  of  creating  debits  in 
our  favor  on  the  part  of  those  countries  which  had  a 
favorable  balance  in  their  trade  with  us,487  debits  at  least 
large  enough  to  counterbalance  the  credits  due  them  from 
us  by  reason  of  the  excess  of  their  sales  over  their  pur- 
chases in  their  trade  with  us.  In  the  case  of  industrially- 
developed  countries,  the  activities  accomplishing  this 
result  develop  to  a  considerable  extent  automatically, 


National    Monetary     Commission 

i.  e.,  as  natural  consequences  of  the  industrial  relations 
to  the  less  developed  foreign  countries,  and  to  a  smaller 
extent,  as  the  result  of  fixed  plans  and  designs. 
Foreign  countries  may  become  our  debtors — 
(i)  Through  business  operations  which  we  carry  on 
in  and  with  foreign  countries,  which  include  exchange, 
arbitrage,  and  commodity  transactions  with  these  coun- 
tries undertaken  either  for  speculative  purposes,  to  secure 
payment,  or  to  attract  gold  from  them,  and  through  serv- 
ices which  we  render  those  countries,  or  through  mercan- 
tile, industrial,  or  transportation  enterprises  which  we 
establish  in  the  foreign  countries  or  in  which  we  partici- 
pate. 

The  German  enterprises  established  in  foreign  Euro- 
pean countries,  which  were  mentioned  in  section  4,  sub.  II 
(p.  432  et  seq.) ,  include  the  foreign  branches  of  the  Ger- 
man banks,  such  as  the  Deutsche  Bank,  the  Disconto- 
Gesellschaft,  and  the  Dresdner  Bank  in  London.  The 
foreign  German  participations  include  the  ownership  by 
German  banks  of  stock  in  foreign  banking  institutions, 
such  as  the  ownership  by  the  Comnierz-und  Disconto- 
Bank  of  shares  in  the  London  and  Hanseatic  Bank,  by 
the  Dresdner  Bank  of  stock  in  the  General  Mining  and 
Finance  Corporation  (Limited)  in  London,  etc.  Accord- 
ing to  the  report  of  the  Central  Federation  of  German 
Banks  and  Bankers  (Centralverband  des  Deutschen  Bank- 
und  Bankiergewerbes)  of  December,  1903  (concerning 
the  effects  of  the  stock  exchange  act  and  the  stock  ex- 
change tax  act) ,  since  the  stock  exchange  act  of  January 
i,  1897,  went  into  effect,  numerous  time  transactions  and 
other  dealings  of  the  German  public  in  (American)  rail- 


532 


The     German     Great    Banks 

way  stock  and  in  mining  shares  transacted  in  many 
foreign  countries,  particularly  in  London,  Paris,  and 
New  York,  have  to  be  considered  in  which,  to  escape  the 
German  tax  on  securities,  the  securities  to  a  large  extent 
remained  abroad.  According  to  the  inquiry  of  the  central 
federation  (see  above  report,  p.  48),  which  was  only  par- 
tially successful,  the  securities  (for  the  most  part  probably 
of  the  classes  above  mentioned) 488  which  the  1 8  largest 
banks  and  banking  houses  of  Berlin,  namely,  the  members 
of  the  so-called  Stempelvereinigung,  had  in  foreign  deposi- 
tories on  December  31,  1902,  on  their  own  and  outside 
accounts  amounted  to  602,268,000  marks,  while  the  value 
of  securities  which  only  149  other  German  (provincial) 
banks  and  bankers  had  at  the  same  time  in  foreign 
depositories  amounted  to  454,151,000  marks. 

According  to  Paul  Dehn489  the  total  investments  of 
French  capital  in  foreign  countries  in  the  middle  of  the 
year  1902,  according  to  official  investigations,  amounted  to 
24,000,000,000  marks  (30,000,000,000  francs).480  Dehn 
further  states:491  "It  is  reported  that  the  English  draw 
annually  1,000,000,000  marks  in  interest  from  American 
securities  which  they  hold,  from  plantations,  factories, 
constructions,  etc.,  which  they  have  instituted  and  with 
which  they  pay  for  the  foodstuffs  which  they  import  from 
the  United  States."  According  to  an  address  of  Sir  Edgar 
Speyer  before  the  Institute  of  Bankers,  made  on  June  7, 
1900,  on  "Some  aspects  of  national  finance,"  the  total 
amount  of  British  working  capital  invested  in  foreign 
countries  was  estimated  to  aggregate  £2,500,000,000 
or  50,000,000,000  marks.  According  to  Helfferich,492  the 
former  director  of  the  Credit  Lyonnais,  Germain,  estimated 


533 


National    Monetary     Commission 

that  during  recent  years  France  invested  annually  about 
1,500,000,000  francs  in  foreign  securities. 

(2)  Through  our  acquisition  of  foreign  securities  the 
interest  or  dividends  on  which  are  to  be  paid  by  foreign 
countries,  or  the  capital  amounts  of  which  we  are  to 
receive  when  they  become  due,  or  when  the  securities  are 
sold  abroad. 

It  may  be  objected  that  these  investments  in  the  first 
place  require  means  which  must  be  drawn  from  domestic 
sources  and  which  go  abroad  (as,  for  instance,  when  a  for- 
eign loan  is  taken  up  at  home)  in  consequence  of  such 
investments,  and  that  in  the  beginning  at  least  we  become 
debtors  of  the  foreign  country,  while  any  improvements 
in  this  balance  begin  to  show  only  later  from  the  earnings 
of  our  investments,  and  that,  for  the  time  being,  our  bal- 
ance of  payments  is  not  improved  but  rather  made  more 
unfavorable.  But  while  there  are  doubtless  cases  where 
this  argument  is  effective,  yet  in  the  majority  of  cases  the 
amounts  which  we  invest  abroad — that  is,  which  we  have 
to  pay  to  foreign  countries  in  gold — are  paid  out  of  the  earn- 
ings on  other  foreign  securities  which  are  in  our  possession 
or  through  the  sale  or  exchange  of  other  foreign  securi- 
ties, or  else  are  paid  with  goods  which  we  furnish  to  the 
foreign  countries,  it  being  as  a  rule  agreed,  when  loans  are 
made  to  foreign  countries,  that  our  industries  shall  be 
favored  with  the  contracts  and  orders  for  the  payment  of 
which  the  loans  were  contracted.  A  portion  of  the  securi- 
ties which  have  been  taken  up  eventually  find  their  way 
back  to  the  foreign  countries,  or  other  changes  in  the 
international  balance  of  payments  may  take  place  with 
which  we  must  also  reckon.  Such  changes  happen  con- 


534 


The     German     Great    Banks 

tinually  and  daily  through  the  importation  and  exporta- 
tion of  securities.  Absolutely  no  information  exists  as  to 
the  course  in  time  or  the  volume  of  these  movements, 
although  such  data  only  would  enable  us  to  perceive  more 
fully  the  significance  of  the  imports  and  exports  of  mer- 
chandise and  specie,  i.  e.,  of  the  international  commercial 
exchanges.493 

In  so  far  as  the  German  banks,  either  on  their  own 
account  or  as  intermediaries,  have  been  active  in  both 
directions  named,  and  granting  that  they  have  observed 
the  necessary  care  and  foresight  in  preventing  or  arrest- 
ing a  dangerous  decline  in  those  earnings  of  our  foreign 
investments,  which  might  be  applied  to  improving  our 
unfavorable  balance  of  payments,  they  have  undoubtedly 
rendered  valuable  service,  absolutely  essential  in  the  in- 
terests of  our  national  economy.  The  following  important 
limitations,  however,  must  be  made: 

The  undertaking  of  or  participation  in  foreign  invest- 
ments is  practicable  only  when  there  is  a  considerable 
surplus  of  capital  at  home  and  permissible  only  after  the 
domestic  demand  for  capital  is  fully  met.  Even  if  these 
conditions  exist  such  investments  are  not  to  be  favored, 
when  in  the  long  run  they  result  in  the  strengthening  of 
foreign  industry  and  the  enhancing  of  foreign  competition 
against  our  domestic  trade  and  industry. 

Such  participations  of  German  capital  in  foreign  coun- 
tries comprise  chiefly  banks,  manufacturing,  colonization, 
plantation,  mining,  light,  power,  and  railway  undertak- 
ings and  other  land  and  water  transportation  enterprises. 
The  earnings  from  these  participations  increase  the  credit 
side  of  our  balance  of  payments  only  to  the  extent  that 


535 


National    Monetary     Commission 

they  exceed  the  earnings  of  foreign  investments  in  Ger- 
many. The  latter  are  chiefly  gas  works  and  street  and 
local  railway  enterprises. 

One  of  the  important,  if  not  the  most  important,  item  in 
the  balance  of  payments  is  represented  by  the  credits 
which  we  grant  to  foreign  countries  in  our  commercial 
dealings  with  them.  Since  these  amounts  can  be  obtained 
only  from  the  books  of  the  individual  concerns  which  grant 
these  credits,  it  follows  again  that  a  total  of  the  item  in 
question  can  at  best  be  but  approximately  estimated. 

On  the  other  hand  domestic  enterprises  and  participa- 
tions abroad,  in  so  far  as  they  do  not  merely  benefit  foreign 
industry,  are  to  be  regarded  favorably  as  a  rule,  especially 
when  proper  care  is  used  in  their  selection,  when,  in  the 
main  at  least,  they  are  conducted  on  domestic  account, 
and  when  they  are  either  intended  or  suited  to  extend  the 
domestic  sphere  of  influence  and  to  serve  as  a  basis  for 
larger  activity  of  domestic  industry.  These  factors  do  not 
affect  immediately  the  balance  of  payments,  though  sooner 
or  later  they  are  bound  to  find  expression  in  ponderable 
items  in  our  necessarily  inexact  balance  of  payments. 

The  above  considerations,  it  is  true,  do  not  justify 
foreign  investments,  whenever  and  in  so  far  as  the  earn- 
ings from  our  foreign  investments  and  enterprises  exceed 
the  amounts  required  to  pay  for  our  excess  of  imports. 
As  a  matter  of  fact  the  returns  from  our  foreign  invest- 
ments by  far  exceed  the  latter  amount  (see  below,  p.  545). 

But  we  must  always  reckon  with  the  possibility  that 
our  domestic  exports  may  decline,  while  our  imports 
will  remain  the  same,  or  even  increase.  This  would 
result  in  a  steadily  growing  adverse  trade  balance,  which 


536 


The     German     Great    Banks 

might  become  the  more  portentous  the  smaller  the  credit 
items  in  our  balance  of  payments,  i.  e.,  our  foreign  in- 
vestments which  render  the  foreign  country  tributary  to 
us,  and  the  returns  from  which  can  be  used  to  counter- 
balance the  debit  items  in  our  trade  balance.  Further- 
more, unless  we  render  foreign  countries  tributary  to 
us  to  an  increasing  extent,  the  time  might  come  when, 
with  the  growing  importance  of  their  own  home  mar- 
ket, these  countries  would  no  longer  be  constrained 
to  furnish  us  with  their  foodstuffs  and  raw  materials. 
As  it  is,  these  exports  or  the  money  equivalent  thereof 
go  to  meet  their  obligations  toward  us  in  the  shape  of 
profits  and  interest. 

A  large  decline  of  our  imports  would  also  tend  to  de- 
stroy our  industry,  and  thus  our  export  trade,  which  fur- 
nish food  and  employment  to  our  population,  and  which, 
as  it  is,  is  greatly  jeopardized  by  the  growth  of  imperi- 
alistic and  protectionist  tendencies  in  countries  which 
are  at  present  our  principal  customers. 

(C)  It  is  clear  even  from  what  has  been  said  that  our 
foreign  investments,  as  a  whole,  must  necessarily  go 
beyond  the  lowest  limits  set  by  our  adverse  trade  bal- 
ance. But  for  a  number  of  special  classes  of  invest- 
ment, the  returns  from  which  serve  to  improve  our 
balance  of  payments,  the  necessity  and  utility  is  proven 
by  other  important  and  cogent  reasons,  which  retain 
their  validity,  even  if  the  above  general  considerations 
be  regarded  of  insufficient  strength. 

(a)  As  regards  the  German  insurance  business  in 
foreign  countries,  it  is  desirable  for  the  domestic  in- 
surance business  for  the  reason,  among  others,  that  by 
extending  the  scope  of  the  business  a  broader  distribu- 


537 


National    Monetary     Commission 

tion  of  the  risks  is  effected  in  time  and  place.494  The 
returns  from  the  foreign  business  of  the  German  in- 
surance enterprises  naturally  increase  the  credit  side  of 
the  balance  of  payments  only  in  so  far  as  they  are  not 
counterbalanced  by  the  earnings  of  foreign  insurance 
companies  in  and  on  account  of  Germany.495 

(6)  The  oversea  banking  business  makes  it  possible  for 
our  domestic  exporters  and  importers,  as  well  as  for  our 
general  commercial  activity  in  foreign  countries,  to  dis- 
pense with  foreign  intermediaries  for  their  financial 
transactions  and  credit  needs.  Through  the  financing  of 
the  foreign  business  of  our  merchants  German  bank 
acceptances  have  been  introduced  to  foreign  markets, 
with  the  result  that  the  ofttimes  considerable  earnings 
of  foreign  concerns  in  this  field  have  been  turned  into 
German  channels  and  have  thus  become  available  for 
improving  our  balance  of  payments.  Thus,  for  instance, 
as  late  as  1888,  according  to  consular  reports,  the  com- 
mercial exchanges  between  Germany  and  Chile  valued 
in  the  aggregate  at  60,000,000  marks  yielded  about 
500,000  marks  of  profits  to  British  bankers,  merely 
because  all  acceptances  by  means  of  which  these  ex- 
changes were  effected  had  to  be  liquidated  in  the  British 
market.496 

In  the  excellent  "Tabellen  zur  Wahrungstatistik " 497 
(tables  regarding  currency  statistics)  of  the  Austrian 
Ministry  of  Finance  an  estimate  is  mentioned — according 
to  which  out  of  the  total  value  of  the  oversea  trade  of  the 
European  Continental  countries  more  than  6,000,000,000 
marks  is  yearly  drawn  on  England.  According  to  estimates 
of  the  British  board  of  trade,  which  relate  to  the  year  1898, 


538 


The     German     Great    Banks 

bankers'  and  other  commissions  aggregated  in  that  year 
18,000,000  pounds  sterling  (that  is,  about  432,000,000 
marks) . 

The  over-sea  banking  business,  furthermore,  opens  up 
possibilities  for  the  investment  of  the  domestic  surplus 
capital  (see  above,  p.  92).  This  annually  growing  surplus 
increases  the  demand  for  investment  opportunities,  which 
can  not  be  'met  fully  by  the  issue  of  domestic  state,  com- 
munal, and  other  loans. 

Our  foreign  banks  are  also  in  a  better  position  to  obtain 
timely  information  regarding  more  important  contracts, 
works,  and  government  orders  about  to  be  awarded  or 
regarding  the  impending  issue  of  foreign  loans,  and  are 
thus  able  to  lend  much  more  effective  assistance  to  German 
concerns  seeking  the  awards.  Through  their  connections 
with  the  foreign  markets  they  are  also  in  a  position  to  call 
the  attention  of  foreign  purchasers  to  German  firms  and, 
vice  versa,  to  bring  to  the  notice  of  German  manufacturers 
and  traders  suitable  representatives  and  purchasers  in  the 
foreign  countries. 

Under  the  same  head  come  also  the  profits  of  domestic 
banks  from  trading  in  foreign  securities  and  returns  from 
other  foreign  business.  Against  these  earnings  have  to 
be  set,  as  elsewhere,  the  corresponding  earnings  of  foreign 
banks  from  German  business,  including  the  commissions 
paid  to  foreign  fiscal  and  disbursing  agencies  on  account  of 
our  coupons  and  bonds,  loan  conversions,  talon  renewals, 
etc. 

There  is  no  means  of  estimating  even  approximately  the 
volume  of  the  foreign  business,  including  dealings  in 
foreign  securities  effected  by  our  banking  institutions,  nor 


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National    Monetary     Commission 

of  the  returns  from  this  business  in  the  shape  of  interest, 
commissions,  etc.  They  include  chiefly  the  earnings  from 
underwriting,  emitting,  converting,  unifying,  and  rehabil- 
itating foreign  state,  railroad,  and  private  securities;  from 
the  financing  of  foreign  operations  and  enterprises,  from  the 
granting  of  credit  to  foreign  firms,  institutions,  enterprises, 
concerns,  and  individuals  by  way  of  current  account, 
bills  and  other  credit  operations ;  profits  from  the  loaning 
of  domestic  securities  abroad,  from  the  foreign  bill  busi- 
ness, including  brokerage  and  remittances;  from  the  for- 
eign trade  in  specie,  also  earnings  of  interest,  commissions, 
and  brokerage  in  international  commercial  transactions; 
profits  from  the  purchase  of  foreign  bills  of  exchange  and 
the  accumulation  of  credits  (payable  in  gold)  abroad;498 
from  services  in  connection  with  the  payment  of  foreign 
coupons,  from  the  redemption  of  drawn  or  otherwise 
matured  debentures,  the  delivery  of  new  coupon  sheets, 
as  well  as  the  talon  renewals  of  foreign  securities. 

(c)  The  earnings  of  the  German  merchant  marine  from 
oversea  shipping  also  constitute  an  important  factor  in 
our  balance  of  payments .  The  above-mentioned  ' '  Tabellen 
zur  Wahrungsstatistik"  prepared  by  the  Austrian  Ministry 
of  Finance,  estimate  the  freight  receipts  of  the  Austro- 
Hungarian  merchant  marine  in  the  foreign  trade  at  60,000,- 
ooo  crowns  and  the  credit  accruing  therefrom  to  the  inter- 
national balance  of  payments  of  the  country  at  30,000,000 
crowns.499  It  is  unnecessary  to  demonstrate  that  the  ser- 
vices of  our  merchant  marine  in  the  oversea  trade  have 
proved  of  immense  value  in  the  development  of  our  export 
trade  and  have  contributed  largely  to  increase  our  prestige 
among  foreign  nations,  our  national  power  and  influence, 
as  well  as  our  financial  strength. 


540 


The     German     Great    Banks 

(d)  Furthermore,  we  must  take  into  account  the  earn- 
ings on  account  of  foreigners  traveling  in  Germany,  which 
are,  however,  more  than  fully  set  off  by  the  corresponding 
foreign  earnings  on  account  of  Germans  travelling  abroad. 

(e)  Other  items  in  the  balance  of  payments  are:  The 
charges  of  domestic  railways  for  carrying  goods  in  transit 
to   foreign   countries;   the   excess   charges    for   the   mu- 
tual   renting    of    railway    cars;    clearance    balances    re- 
ceived in  the  international  postal,  passenger,  telegraph 
and    telephone    services;  the    expenditures    of    foreign 
vessels  in  the  home  ports  (minus  our  own  payments  in 
foreign  ports) ;  the  charges  for  the  construction  of  vessels 
on  foreign  account  in  our  dock  yards  and  our  claims  from 
the  sale  of  domestic  vessels  to  foreigners ;  the  claims  arising 
from  the  international  exchange  of  patents  and  copy- 
rights; the  claims  of  members  of  the  liberal  professions, 
i.    e.,    technical    experts,    teachers,    physicians,    actors, 
musicians,  etc.,  engaged  abroad;  the  claims  resulting  from 
the  ownership  in   foreign  countries  of   land   and  mort- 
gages, from  liquidated  inheritances  and  from  marriage  con- 
tracts concluded  abroad,  and,  according  to  Ad.  Soetbeer,600 
also  the  extraordinary  payments501  which   one   country 
must  make  to  another  as  the  result  of  political  relations 
or  events   (war  indemnities,  subsidies,  pensions,  cost  of 
administration) . 

Finally,  an  important  factor  in  the  balance  of  pay- 
ments is  presented  by — 

(/)  The  investments  of  home  capital  in  foreign  securities, 
the  utility  and  necessity  of  which  are  based  on  a  number 
of  weighty  reasons  besides  those  mentioned  above. 

Any  attempt  to  liquidate  the  very  considerable  adverse 
balance  of  our  trade  with  foreign  countries  by  means  of 


541 


National    Monetary     Commission 

cash  remittances  instead  of  the  interest  and  dividends 
on  foreign  securities  or  the  sales  of  such  securities  would 
prove  to  be  very  expensive.  It  would  lead  to  serious 
disturbances  in  the  money  market,  at  times  even  to 
crises,  and  might  endanger  in  a  large  measure  our  cur- 
rency and  credit  systems.  Besides  we  need  proper 
foreign  securities,  i.  e.,  such  as  are  payable  in  gold  to 
secure  our  financial  readiness  for  war  (see  p.  22  et  seq.) 
as  a  necessary  means  of  compensation  against  eventual 
withdrawals  of  large  foreign  credits. 

We  need  them,  furthermore,  in  order  to  be  able  to 
draw  gold  from  abroad  to  satisfy  the  urgent  and  pressing 
needs  for  credit  and  instruments  of  payment  which 
usually  occur  in  the  last  days  preceding  and  the  first 
days  following  a  declaration  of  war,502  as  well  as  to  meet 
the  violent  demand  for  cash,  which  is  apt  to  occur  at 
such  times  during  a  temporary  loss  of  confidence  in  any 
form  of  currency  except  gold.  The  holdings  of  such 
international  securities  which  can  be  realized  at  the 
various  international  bourses  present,  therefore,  the 
best  protection  against  the  excessive  fall  during  warlike 
times  in  the  quotations  of  our  domestic  securities  and 
against  the  weakening  or  glutting  of  our  own  stock 
exchanges. 

In  this  connection  it  must  be  remembered  what  impor- 
tant political  results  have  been  brought  about  by  the  grant- 
ing or  refusing  of  loans  to  foreign  states  and  to  what  extent 
the  home  government  may  use  for  political  purposes  its 
power  of  permitting  or  prohibiting  the  issue,  official 
listing,  and  pledging  of  foreign  securities,  especially  at 
times  when  the  foreign  state,  either  because  of  the  closing 

542 


The    German     Great    Banks 

or  overstocking  of  other  foreign  markets,  is  confined  to 
our  exclusive  assistance  and  when  it  is  in  our  power  to 
inflict  great  damage  on  it  by  our  refusal  or  prohibition. 
The  skirmishes  of  the  political  advance  posts  are  fought 
on  financial  ground,  though  the  selection  of  the  time 
and  the  enemy  as  well  as  the  manner  in  which  these 
skirmishes  are  to  be  fought  depends  upon  those  responsible 
for  the  direction  of  our  foreign  policy. 

Much  more  than  ever  before  we  Germans  will  have  to 
bear  in  mind  that  industrial  contracts,  commercial  enter- 
prises, and  capital  investments  are  conveying  from  one 
country  to  another  not  only  capital  and  labor  but  also 
political  influence. 

Dehn  very  properly  shows  how  French  capital,  for 
instance,  has  rendered  pioneer  services  to  the  French 
foreign  policy  in  Tunis  and  Morocco,  in  Turkey  and 
Greece,  and,  above  all,  in  Russia,  while  Sombart  goes 
so  far  as  to  characterize  "the  whole  Franco-Russian 
alliance  as  a  bankers'  creation"  (Bankiergebilde),503  an 
assertion  which  is  rather  extreme.  In  the  same  vein, 
Georg  v.  Siemens,  in  his  article  on  "The  National  Impor- 
tance of  the  Bourse"  (in  the  Nation,  Oct.  6,  1900),  calls 
attention  to  the  great  political  advantages  which  we 
gained  in  Italy,  after  political  discord  had  grown  up 
between  Italy  and  France,  when  we  immediately  placed 
at  Italy's  disposal  our  capital  and  stock  exchanges,  and 
that  the  battle  between  Russia  and  England  about  Persia 
was  primarily  fought  "on  financial  ground." 

In  more  recent  times  we  witnessed  the  beginning  of 
better  political  relations  between  France  and  Italy, 
brought  on  primarily  through  financial  reconciliation,  par- 
ticularly the  taking  over  a  few  years  ago  by  a  French 

543 


National    Monetary     Commission 

banking  group  of  a  large  amount  of  stock  in  the  Banca 
Commerciale  Italiana,  created  at  the  start  without  the 
cooperation  of  French  capital.  We  saw  only  recently 
that  the  French  Government  threatened  to  withdraw 
the  listing  privilege  from  the  Turkish  state  bonds  unless 
certain  contracts  were  awarded  to  French  industry. 
The  British  Government  sought  to  prevent  in  every  way 
the  granting  of  a  banking  concession  in  Persia  to  the 
German  Orienibank  for  fear  that  such  a  grant  might  lead 
to  a  diminution  of  its  own  political  influence. 

The  taking  over  of  loans  for  China  and  Japan  became 
an  object  of  contention  among  all  great  nations,  for  the 
well-known  reason  that  financial  influence  merely  paves 
the  way  for  political  influence.  France  and  England  are 
competing  in  Spain  and  Portugal — and  nearly  all  the  great 
powers  in  Turkey — to  gain  political  influence  by  means  of 
financial  aid.  Notwithstanding  some  painful  experience 
in  Argentina,  the  English  banks  and  capitalists  have  been 
tenaciously  lending  financial  support  to  the  efforts  of  their 
Government  to  maintain  and  strengthen  the  British  politi- 
cal sphere  of  influence  in  that  part  of  the  world.  In  Canada 
and  Mexico  and  in  Central  and  South  America  the  Ameri- 
cans are  systematically  planning  by  investments  of  capi- 
tal and  all  sorts  of  financial  measures  to  drive  out  both 
European  political  interference  and  European  commerce. 

In  view  of  the  above  facts  and  considerations,  the  ques- 
tion whether  issues  of  foreign  securities  even  beyond  the 
amount  required  to  balance  the  excess  of  our  foreign 
imports  are  economically  correct  in  principle  must  be 
answered  in  the  affirmative. 


544 


The     German     Great    Banks 

The  presumptions  under  which,  in  each  individual  case, 
the  issue  of  foreign  securities  is  permissible  and  unob- 
jectionable from  the  national  point  of  view  have  been 
discussed  in  detail  above  (p.  384  et  seq.). 

(D)  With  regard  to  the  volume  of  the  foreign  invest- 
ments of  home  capital,504  the  report  of  the  Reichs-Marine- 
Amt  of  December,  1905,  on  Die  Entwickelung  der  Deut- 
schen  Seeinteressen  im  letzten  Jahrzehnt  (the  development 
of  German  marine  interests  during  the  last  decade)  gives, 
on  the  basis  of  consular  reports,  the  following  estimates. 
The  latter,  of  course,  are  based  in  turn  upon  estimates 
more  or  less  accurate  of  others  furnished  to  the  consuls  at 
their  respective  seats. 

(a)  The  amount  of  German  capital  invested  in  foreign 
undertakings,  plants,  business  enterprises,  and  partici- 
pations is  estimated  at  7,700,000,000  to  9,200,000,000 
marks,  equivalent  to  an  income,  reckoned  at  an  average 
of  6  per  cent,  of  462,000,000  to  552,000,000  marks. 

Concerning  this  estimate  the  report  remarks  as  follows 
(Introduction,  p.  XI):  "In  these  amounts  (7,700,000,000 
to  9,200,000,000  marks)  the  current  German  merchandise 
credits,  which  amount  to  at  least  one-fourth  to  one-third, 
perhaps  even  to  one-half,  the  amount  of  the  yearly  German 
exports — that  is,  to  1,500,000,000  to  2,750,000,000  marks — 
are  included  only  in  part,  and  the  same  is  true  of  the  credits 
frequently  advanced  on  account  of  imports."  We  have 
already  remarked  above  that  there  are  no  means  of  even 
estimating  the  total  credits  granted  by  us  to  foreigners 
in  international  trade,  and  the  same  is  true  of  our  charges 
for  services  of  all  sorts  rendered  by  us. 


90311°— IT 36  545 


National    Monetary     Commission 

(b)  The  amount  of  foreign  securities  in  the  possession 
of  German  holders  is  estimated  at  least  at  16,000,000,000 
marks  (ib.,  introduction,  pp.  XII,  and  169),  equivalent  to 
an  income  of  800,000,000  marks,  reckoned  at  5  per  cent. 

Accordingly  the  total  amount  of  our  foreign  capital 
investments  for  the  year  1905  may  be  estimated  at  a 
minimum  of  24,000,000,000  to  25,000,000,000  marks 
(with  yearly  earnings  of  about  1,352,000,000  marks)  an 
amount  which  very  likely  falls  considerably  short  of  the 
true  amount.  (See  note  20,  p.  803.) 

As  a  matter  of  fact,  as  was  illustrated  before  in  a  few 
important  instances,  the  true  volume  of  the  foreign  invest- 
ments of  domestic  capital  in  the  main  fields,  on  account 
of  the  lack  of  safe  statistical  bases,  can  not  be  estimated 
even  approximately.  This  is  shown  strikingly  and  in  great 
detail  by  the  "Tabellen  zur  Wdhrungsstatistik™5  prepared 
in  the  Austrian  Ministry  of  Finance,  especially  in  the 
chapter  dealing  with  "earnings  in  foreign  countries" 
(Erwerbstdtigkeit  ausser  Landes),  although  the  subject 
is  treated  in  the  report  with  the  utmost  care  and 
thoroughness. 

SECTION    8.    REFORM    PROPOSALS    CONCERNING    BANK 
DEPOSITS  AND  THEIR  JUSTIFICATION  (50e). 

I.    GENERAL   OBSERVATIONS  (506a). 

It  was  pointed  out  in  an  earlier  chapter  how  the 
German  banks  developed  hand  in  hand  with  the  scanty 
means  of  the  German  people  and  in  accordance  with  the 
demands  of  German  trade  and  industry.  In  England  a 
different  development  took  place,  which,  while  in  equally 
close  touch  with  English  requirements  and  the  given 


546 


The     German     Great    Banks 

concentration  in  the  fields  of  distribution,  credit,  and 
national  wealth — all  of  which  was  entirely  lacking  in 
Germany — led  from  the  outset  to  a  sharp  differentiation 
between  the  deposit  banks  and  other  banks.  This  is 
sufficient  ground  for  a  large  number  of  Germans,  who  are 
wont  to  underrate  domestic  as  compared  with  foreign 
achievements,  to  point  to  the  English  system  as  the  only 
true  one,  and  to  demand  its  unrestricted  adoption  at 
home.  Similar  views  are,  however,  held  in  certain  nota- 
ble scientific  quarters.  It  is  particularly  Adolph  Wagner 
who  has  been  advocating  for  a  long  time  a  reform  along 
English  lines,  based  in  his  case  upon  scientific  conviction, 
which,  as  is  well  known,  is  least  apt  to  change  under  the 
influence  of  mere  practical  experience. 

To  my  mind  it  was  a  fortunate  fact  that  the  German 
banks,  from  the  very  start,  placed  themselves  at  the 
particular  service  of  trade  and  industry.  But  at  all 
events  it  will  be  granted  that  this  was  due  to  the  histori- 
cally given  German  conditions  and  requirements.  As  a 
result  of  this  connection  the  banks  have  taken  a  consider- 
able part  in  the  splendid  industrial  and  commercial 
development  of  the  country,  which  is  characteristic  of  the 
last  decades.  Starting  at  a  time  when  domestic  agri- 
culture was  no  longer  in  a  position  to  provide  sufficient 
food  and  work  for  the  greatly  increased  population  the 
German  banks  contributed  indirectly  toward  transform- 
ing Germany  from  an  agricultural  country,  if  not  into  an 
exclusively  industrial  and  commercial  country  at  least 
into  one  where  these  two  economic  interests  are  of  pre- 
ponderant importance.  This  is  sufficient  to  arouse  against 
the  banking  interest  all  those  who  detest  the  whole  trend 


547 


National    Monetary     Commission 

of  "industrialization."  The  charge  is  made  against  the 
banks  that  through  their  deposit  system  they  deprive 
agriculture  of  considerable  funds,  which  they  use  instead 
for  the  support  of  industry,  especially  of  the  export  indus- 
tries. Political  circles  sharing  these  views  are  supported 
in  this  campaign  by  the  extremists  on  the  opposite 
side — i.  e.,  the  social  democrats,  who  oppose  the  banks  as 
the  most  powerful  and  dangerous  representatives  of 
movable  capital. 

A  regrettable  feature  of  German  banking  in  common 
with  other  industries  is  the  gradual  ousting  of  small  enter- 
prises by  large-scale  enterprise.  This  development  has 
caused  a  number  of  members  and  spokesmen  of  the 
"middle  classes"  (in  this  case  the  smaller  bankers — for 
instance,  Caesar  Straus)  'to  attack  the  German  banks  on 
the  ground  that  they  were  pursuing  an  altogether  wrong 
course.  Notwithstanding  the  heterogeneity  of  political 
and  economic  views  and  the  great  variety  of  motives  and 
mutually  exclusive  purposes  of  those  who  have  been 
advocating  "reform"  in  the  field  of  deposits  during  the 
last  few  decades,  there  is  unanimity  on  one  point,  namely, . 
that  "something  must  be  done"  that  in  some  way  or 
other  the  funds  flowing  to  the  banks  should  be  diverted 
in  a  larger  degree  to  agriculture,  or  "national  economic 
ends,"  to  use  the  more  popular  catchword.  As  soon,, 
however,  as  practical  proposals  are  called  for,  various  cur- 
rents and  parties  appear  with  often  obscure  and  contra- 
dictory demands,  despite  the  fact  that  the  several  parties 
and  assailants  very  often  contrive  to  veil  their  true  ends 
and  purposely  move  in  separate  columns  with  the  view, 
however,  of  combined  attack.  Moreover,  each  time  a 


548 


The    German     Great    Banks 

crisis  occurs,  an  event  which  can  hardly  ever  be  avoided 
in  economic  life  under  any  banking  system,  there  appear 
on  the  scene  any  number  of  patented  critics  or  persons 
who  have  become  experts  overnight,  who,  to  say  the 
least,  try  to  impress  the  public  that  had  the  German 
banking  system  been  intrusted  to  their  care  it  would 
lave  worked  faultlessly,  and  who  use  such  favorable 
occasions  to  prove  their  capacity  of  "  saving  the  country  " 
3y  means  of  the  most  radical  proposals. 

i.  SAFETY  OF  DEPOSITORS — A  REASON  FOR  REFORM  PROPOSALS. 

The  majority  of  known  reform  proposals  hitherto 
made  are  based  on  the  following  considerations: 

The  German  banking  system,  which,  unlike  the  English 
system,  combines  the  issuing  of  securities  and  speculating 
activity  on  own  and  outside  accounts  with  the  receiving 
of  money  deposits  endangers,  of  necessity,  the  safety  of 
the  deposits.  These  are  intrusted  to  the  banks  with 
the  confidence  in  their  absolute  security.  The  banks, 
lowever,  use  them  in  providing  the  means  for  their 
own  enterprises  and  for  speculation  in  securities  on  out- 
side account.507  In  Germany  the  detrimental  effects 
of  such  a  system  have  already  become  evident  in  a 
marked  degree  through  overspeculation,  excessive  security 
issues,508  crises,509  and  bankruptcies,  which  have  caused 
great  losses  to  depositors. 

2.  THE  PARTICULAR  PROPOSALS,  MADE  WITH  THIS  END  IN  VIEW  BY  C^SAR 
STRAUS,  OTTO  WARSCHAUER,  AND  COUNT  VON  ARNIM-MUSKAU. 

We  are  therefore  urged  to  adopt  the  British  banking 
system.  The  latter,  it  is  said,  provides  for  a  strict 
division  of  the  field  arid  for  the  complete  divorce  between 


549 


National    Monetary     Commission 

stock  exchange  and  deposits,  and  thus  guarantees  the 
safety  and  prudent  administration  of  the  moneys  de- 
posited. In  other  words,  it  is  imperative  to  effect  a 
complete  separation  between  the  deposit  business  and 
the  issue  and  flotation  business.  This  is  the  general 
trend  of  the  proposals  of  the  late  Caesar  Straus,  a  former 
private  banker  in  Frankfort -on-the-Main,  and  of  Otco 
Warschauer. 

Straus  advocates  the  establishment  of  a  central  deposit 
bank  for  the  whole  German  Empire  by  private  means, 
but  under  government  supervision,  with  a  capital  of 
60,000,000  marks,  of  which  25  per  cent,  that  is,  15,000,000 
marks,  is  to  be  paid  in;  the  bank  to  maintain  branches 
in  all  important  trade  and  money  centers  and  to  transact 
business  in  other  places  through  the  intermediary  of  the 
Reichsbank.510 

Warschauer  advocates  the  establishment  of  a  Reichsde- 
positenbank  (Imperial  Deposit  Bank)  with  a  share  capital 
of  50,000,000  marks,  of  which  50  per  cent,  that  is, 
25,000,000  marks,  is  to  be  paid  in.  Alongside  this 
imperial  institution,  deposit  banks  for  the  individual 
States  might  be  founded,  which  would  bear  the  same 
relation  to  it  as  the  present  private  note  banks  do  to 
the  Reichsbank.511  The  proposed  institution,  just  as 
the  Reichsbank,  should  follow  a  plan  of  decentralizing  its 
operations  through  the  opening  of  a  large  number  of  local 
offices  in  the  various  confederated  States.  He  presages 
for  the  proposed  central  deposit  bank,  the  deposits  oi 
which,  in  his  opinion,  would  reach  the  total  of  at  least* 
1,000,000,000  marks,  a  dividend  of  21  to  22  per  cent 
("an  extremely  low  estimate,"  as  he  expresses  himself). 


The     German     Great    Banks 

Judging  by  the  average  profits  of  the  London  stock  banks, 
he  assumes  as  "extremely  probable"  a  dividend  in  the 
long  run  of  1 2  per  cent.  The  above  prediction  may  pos- 
sibly explain  the  fact  that,  according  to  Warschauer,  the 
proposed  deposit  banks  are  to  be  permitted  to  acquire 
first-class  mortgages  as  well  as  to  advance  money  on 
industrial  securities  and  bank  shares,  to  be  sure  with 
the  limitation  that  only  "first-class  securities"  are  to 
be  considered.  This  he  thinks  will  cause  a  gradual 
defection  of  depositors  from  the  credit  banks.  The 
latter,  in  his  view,  represent  merely  private  interests 
with  no  claim  to  special  protection  by  the  Empire,  and 
through  their  alertness  will  undoubtedly  soon  find  new 
and  perhaps  even  more  profitable  fields  of  operation.512 

At  the  same  time  both  Warschauer  and  others  before 
and  after  him  made  a  number  of  substitute  proposals 
to  be  applied  to  those  of  the  existing  banks  which  receive 
deposits.  Most  important  among  these  are  the  following: 

The  proportion  of  deposits,  in  so  far  as  they  are  savings 
deposits,513  to  the  share  capital — in  other  words,  the 
maximum  amount  of  deposits  a  bank  might  be  permitted 
to  receive  should  be  fixed  by  law  at  about  200  per  cent 
of  the  share  capital,  as  against  50  per  cent,  which  is  the 
legal  maximum  for  mortgage  banks,  since  the  smaller  the 
working  capital  the  less  secured  were  the  rights  of  the 
creditors. 

Furthermore,  the  principle  of  publicity  should  be 
adopted  more  largely  than  heretofore  with  regard  to 
"  savings  deposits"  (Spareinlagen) ,  which  should  be 
stated  separately  in  the  balance  sheets  either  by  all514 
banks,  banking  associations  with  limited  liability,  and 


National    Monetary     Commission 

mutual  credit  societies,515  or  by  such  professional  deposi- 
taries, who  receive  the  funds  of  the  general  public  to  the 
extent  of  50  per  cent  over  and  above  their  own  invested 
capital,  who  carry  on  a  notation  and  speculation  busi- 
ness, or  who  participate  in  industrial  undertakings,516 
which  would  again  be  inclusive  of  all  present-day  banks 
and  even  bankers.  All  of  them  should  be  held  to  publish 
quarterly  (as  proposed  by  Count  v.  Arnim-Muskau  before 
the  Bourse  Law  Committee  under  date  of  March  10,  1896) 
or  monthly  reports,  the  form  of  which  should  be  fixed 
by  law,  and  which  should  also  state  the  percentage  of 
savings  deposits  to  share  capital. 

These  summary  balance  sheets  should  state: 

(a)  The  total  amounts  of  undertakings  or  flotations  on 
own  or  outside  account. 

(b)  The  total  liabilities  on  the  date  of  the  statement 
on  account  of  participations  or  undertakings  of  any  kind 
whatever. 

(c)  The  amounts  of  stock  held  apart  from  securities  of 
other  classes. 

(d)  The  amounts  used  for  contango  or  collateral  credit. 

(e)  The  total  liabilities  incurred  through  the  hypothec- 
ation or  "carrying  over"  (Reportierung)  of  securities  and 
participations  owned  by  the  bank  or  through  the  hypothe- 
cation or  "carrying  over"  of  securities  and  participations 
owned  by  outsiders. 

Other  proposals  include  the  demand,  either  that  the 
savings  deposits,  as  in  the  case  of  the  national  banks  in 
the  United  States,  should  be  granted  a  prior  lien  as  over 


552 


The     German     Great    Banks 

other  creditors 517  or  else  that  a  certain  percentage  of  the 
deposits  should  be  invested  in  a  special  manner  to  be 
prescribed  by  law. 

3.  REFORM  PROPOSALS  BASED  ON  OTHER  CONSIDERATIONS. 

Under  this  head  comes  the  recent  proposal  made  by 
Heiligenstadt,  the  president  of  the  Prussian  Zentral- 
genossenschaftskasse  (Central  Bank  of  Mutual  Credit 
Societies).  Without  desiring  to  prejudice  further  neces- 
sary legal  enactments,  and  pointing  to  American  regula- 
tions, he  demands  that  at  least  a  beginning  of  legal  regu- 
lations be  made  by  requiring  that  "whoever  makes  a 
profession"  of  lending  or  administering  moneys  shall 
maintain  at  the  Reichsbank  a  cash  reserve  of  i  to  2  per 
cent  of  all  funds  held  on  current  account  or  deposit.518 

This  proposal,  which  was  advocated  on  nearly  the 
same  grounds  also  by  two  experts  before  the  bank  in- 
quiry commission,  is  not  based  on  the  claim  that  the 
German  credit  banks  do  not  present  sufficient  safety  for 
their  deposits,  but  primarily  on  the  consideration  that 
mainly  through  the  fault  of  the  banks,  the  proportion 
in  German  trade  and  commerce  as  a  whole  of  invested 
capital  to  the  necessary  liquid  working  capital  and  the 
proportion  of  the  liquid  assets  of  the  banks  to  their 
liabilities,  which  represent  their  working  capital,  is  un- 
sound and  should  be  improved. 

At  the  same  time,  and  perhaps  even  in  the  first  place> 
the  proposed  reform,  together  with  other  measures,  advo- 
cated by  him,  is  intended,  as  Heiligenstadt  expressly 
states,519  "to  strengthen  the  operating  resources  of  the 


553 


National    Monetary     Commission 

Reichsbank"  and  to  raise  it  to  the  position  of  "steward 
of  the  national  reserve,"  with  the  view  of  providing 
greater  security  for  the  constantly  increasing  deposits 
on  current-account  and  other  bank  deposits.520 

It  is  probably  in  this  sense  that  the  resolution  of  the 
Tax  and  Economic  Reform  Association  (Vereinigung  der 
Steuer-  und  Wirtschaftsreformer)  dated  February  13  and  14, 
I9o6,521  is  to  be  interpreted,  in  which  the  imperial  chan- 
cellor is  requested  ' '  to  provide  for  the  legal  regulation  of 
the  modes  of  securing  the  deposits  at  the  Reichsbank  ( ! ) 
and  other  banks,  especially  in  view  of  the  growing  pro- 
portions of  the  giro  and  deposit  business  ever  since  1875, 
that  is,  the  year  of  the  foundation  of  the  Reichsbank. 

So  far  as  the  Reichstag  is  concerned  it  confined  itself 
until  the  present  to  point  out  the  presumed  insecurity  of 
the  deposits  by  passing  on  June  17,  1896,  the  following 
resolution,  proposed  by  one  of  its  committees: 

Whereas  the  professional  use  by  banks  and  business  men  of  current 
account-  and  other  deposits  urgently  demands  protective  measures  in  the 
interests  of  the  depositors,  the  Chancellor  is  requested  to  inquire  into  the 
subject  with  the  view  of  ascertaining  how  such  measures  can  best  be  taken, 
to  examine  the  principles  underlying  the  present  draft  and  the  accompany- 
ing report,  and  to  lay  before  the  House  as  soon  as  practicable  a  bill  in 
regulation  of  the  matter. 

4.  CONSIDERATIONS  ON  WHICH  THE  FIRST-NAMED  REFORM  PROPOSALS  ARE 

BASED. 

Before  proceeding  to  a  critical  discussion  of  the  individ- 
ual reform  proposals,  it  seems  proper  to  inquire  whether 
reforms  in  the  field  of  bank  deposits — that  is,  protective 
measures  in  the  interests  of  depositors — are  at  all  neces- 
sary or  even  urgent  in  the  present  state  of  affairs  or  in 
view  of  past  experience.  It  is  such  measures  that  are 


554 


The     German     Great    Banks 

advocated  in  the  first  batch  of  proposals,  mentioned  on 
page  550  and  following  and  in  the  Reichstag  resolution. 

(a)    SUPPOSED    SUPERIORITY   OF   THE   ENGLISH   BANKING    SYSTEM. 

It  has  been  asserted  repeatedly  that  the  English  banking 
system,  with  its  division  of  labor  between  deposit  banks 
proper  and  other  banks  engaged  also  in  the  flotation  and 
underwriting  business,  necessarily  presents  a  larger  degree 
of  security  for  depositors,  as  compared  with  the  German 
"mixed"  system.  For  the  underwriting  and  flotation 
business,  it  is  argued,  as  is  amply  proved  by  the  experi- 
ence of  the  various  countries,  carries  with  it  great  dangers, 
which  in  the  case  of  the  regular  banking  business  do  not 
exist  at  all,  or  at  least,  only  to  smaller  extent. 

As  a  matter  of  fact,  however,  it  has  been  incontestably 
proven,  especially  by  Ad.  Weber  and  Edgar  Jaffe  that 
it  is  precisely  the  English  deposit  banks — not  to  mention 
the  most  recent  experience  of  the  American  note  banks — 
which  despite  their  theoretic  superiority  have  in  practice 
shown  the  most  serious  evils  and  abuses. 

It  is  true,  that  the  English  joint -stock  companies, 
conforming  to  theory,  have  abstained  in  a  direct  way 
from  flotations  and  the  underwriting  business  as  well 
as  from  bourse  speculation.  But  this  very  fact  causes 
another  great  evil,  namely,  that  the  banks  have  never 
shown  any  interest  in  the  newly  founded  companies  or 
in  the  securities  issued  by  these  companies,  while  it  is  a 
distinct  advantage  of  the  German  system,  that  the  Ger- 
man banks,  even  if  only  in  the  interests  of  their  own 
issue  credit,  have  been  keeping  a  continuous  watch  over 
the  development  of  the  companies,  which  they  founded. 


555 


National    Monetary     Commission 

On  the  other  hand  the  English  banks  have  been  promoting 
stock  exchange  speculation,  company  flotations  and  se- 
curity issues  to  an  alarming  extent  by  their  practice  of 
placing  at  the  disposal  of  the  larger  jobbers  and  dealers 
their  daily  surplus  money  against  the  hypothecation  of  se- 
curities of  all  kinds.522  This  went  so  far  that  the  Journal 
of  the  Institute  of  Bankers  referring  to  this  practice  in  its 
issue  of  October,  1899,  page  409,  used  the  following  strong 
terms:  "Nearly  the  whole  of  the  professional  speculation 
on  the  Stock  Exchange  is  carried  on  with  bank  money." 
Among  the  securities  hypothecated  during  the  last 
decade  there  was  an  enormous  number  of  gold-mine  and 
American  railway  shares,  which  during  critical  times  can 
either  not  be  realized  at  all  or  only  at  great  sacrifice; 
thus  it  is  just  in  critical  times  that  the  joint-stock  banks 
have  had  to  fall  back  for  assistance  on  the  Bank  of 
England.628  During  critical  times  therefore  the  joint- 
stock  banks  have  to  depend  upon  the  "single-reserve 
system,"  that  is,  upon  a  system,  which  even  English 
authorities  have  long  ago  condemned  as  inadequate  and 
dangerous,  the  more  so  as  the  Bank  of  England  in  turn 
is  lending  out  the  funds  deposited  with  it.524  It  is 
these  large  sums,  indirectly  placed  at  the  disposal  of 
the  stock  exchange  and  speculators,  which  in  the  state- 
ments of  the  joint-stock  banks  constitute  the  largest 
part  of  the  item  "money  at  call  and  short  notice."525 
In  Germany  these  sums  would  figure  under  the  head  of 
"Reports  and  Lombards,"  whereas  Caesar  Straus, 
strangely  identified  them  with  the  item  "  Kupons  und 
Sorten"  (coupons  and  specie)  of  the  German  balance 
sheets,  and  therefore  regards  them  as  perfectly  harmless.528 


SS6 


T 


German     Great    Banks 


It  is  these  amounts  loaned  by  the  deposit  banks  and 
looking  so  innocent  in  the  summary  balance  sheets, 
which  are  mainly  responsible  for  the  conditions,  which 
Edgar  Jaffe' 527  characterizes  in  the  following  caustic  ex- 
pressions : 

Nowhere  are  there  so  many  swindling  promotions  as  on  the  London 
Stock  Exchange,  nowhere  else  has  the  general  public  lost  such  enormous 
sums. 

On  the  other  hand  it  is  also  a  fact528  which  I  believe 
to  have  amply  proven  in  another  work  of  mine,529  that 
during  the  great  crises,  through  which  England,  like  other 
countries,  has  had  to  pass,  an  alarmingly  large  number  of 
deposit  banks  have  failed. 

It  may  also  be  shown  that  in  other  respects  as  well  the 
much- vaunted  merits  of  the  English  joint- stock  banks  are 
but  illusory.  The  paid-up  capital  of  the  English  deposit 
banks  is  extremely  small,  both  taken  by  itself  as  well  as 
in  proportion  to  the  liabilities.  In  1904  it  amounted  for 
87  deposit  banks  to  65,250,000  pounds  sterling  in  round 
figures,  equal  to  1,305,000,000  marks,  or  an  average  of 
only  15,000,000  marks  per  bank.  On  the  other  hand  the 
proportion  of  surplus  funds  to  the  paid-up  capital,  but 
not  to  the  total  liabilities  is  shown  to  be  exceedingly  high, 
ranging  between  one-half  to  two-thirds  and  even  up  to 
i op  per  cent.  This  is  the  sole  cause,  why  even  with  small 
gross  profits  the  banks  have  been  able  to  declare  the 
high  dividends530  (on  their  paid-up  capital,  of  course)  to 
which  Warschauer  refers,  though  advocating  a  much  larger 
paid-up  capital  for  his  proposed  Imperial  deposit  bank. 

Finally  Jaffe531  showed  that  "with  the  exception  of  a 
small  number  of  the  very  best  banks,  which  have  a  cash- 
reserve  of  5  to  10  per  cent,  the  English  deposit  banks  kept 


557 


National    Monetary     Commission 

no  amounts  on  hand,  which  may  be  regarded  as  reserves 
in  the  above  sense. ' '  In  view  of  the  large  amount  of  time 
deposits  and  deposits  on  current  account  and  the  small 
paid-up  capital  of  the  English  deposit  banks,  Jaffe  rightly 
considers  it  impossible  to  class  under  this  head  the  item 
"money  at  call"  (contango — and  other  loans  to  bill- 
brokers  and  on  exchange),  since  a  portion  of  the  money 
lent  out  on  the  stock  exchange  could  not  be  realized  in 
the  event  of  a  panic. 

Neither  can  the  item  "cash"  (i.  e.,  cash  on  hand  plus 
credits  at  the  Bank  of  England),  the  only  one  that  might 
be  regarded  as  reserve,  be  classed  as  such  in  its  entirety, 
since  part  of  it  is  absolutely  necessary  for  the  daily  use  of 
the  banks  themselves.  But  even  this,  he  emphasizes 
expressly,  is  probably  too  favorable  a  picture,  since, 
according  to  his  experience,  a  large  number  of  the  English 
deposit  banks — and  some  of  the  largest  banks  are  the 
worst  offenders  in  this  regard — in  order  to  make  the  item 
"cash  on  hand"  appear  as  large  as  possible  in  their  public 
statements,  withdraw  from  the  market  large  amounts  at 
the  end  of  each  month  and  particularly  at  the  end  of  each 
half  year.532  It  may  be  said,  though,  that  this  state- 
ment no  longer  holds  true  for  the  most  recent  time,  since 
under  the  pressure  of  public  opinion  and  following  the 
example  of  the  leading  institutions,  nearly  all  the  English 
deposit  banks  maintain  at  present  reserves  in  the  above 
sense  which  amount  from  10  to  15  per  cent  of  the  liabili- 
ties. It  may  thus  be  seen  how  far  the  practical  operation 
of  the  English  system  justifies  the  enthusiasm  for  it  as  a 
model  to  be  adopted  by  us. 


558 


The     German     Great    Banks 

We  shall  now  take  up  the  discussion  of  the  reform  pro- 
posals, which  start  with  the  assertion  that  the  German 
banks  do  not  accord  sufficient  security  to  their  depositors, 
and  examine  the  validity  of  the  underlying  assertions 
that  in  Germany,  as  distinct  from  England,  the  propor- 
tion of  share  capital  and  reserves  to  liabilities,  also  the 
proportion  of  liquid  assets  to  immediately  or  shortly  due 
liabilities,  is  far  too  small;  further,  that  deposits  are  used 
in  Germany  for  syndicate  business  and  stock  speculation, 
and  finally  that  the  combination  of  the  deposit  business 
with  the  underwriting  and  issuing  business  has  caused 
great  injury  to  the  public. 

We  shall  start  with  the  first  and  most  prevalent  charge. 

(6)    THE   ALLEGED   SMALL,   OWN    RESOURCES    (SHARE   CAPITAL    AND   SURPLUS) 
OF  THE  GERMAN  CREDIT  BANKS  AS  COMPARED  WITH  THEIR  LIABILITIES. 

The  169  German  credit  banks  with  a  capital  each  of 
i  ,000,000  marks  and  over,  of  which  nearly  all  are  holding 
deposits  (totaling  about  2,750,000,000  marks)  separately 
mentioned  in  their  balance  sheets,  show  under  date  of 
December  31,  1908: 

Marks. 

Share  capital 2,  646,  ooo,  ooo 

Surplus 607,  ooo,  ooo 

Total  own  resources 3,  253,  ooo,  ooo 

As  against  these  items  there  stand- 
Marks. 

Credits  on  current  account,  including  acceptances 4,  510,  ooo,  ooo 

Deposits 2,  746,  ooo,  ooo 


Or  total  liabilities 7,  256,  ooo,  ooo 

In  other  words,  the  own  resources  of  these  169  banks  con- 
stituted almost  one-half  of  their  total  liabilities,  including 
acceptances  and  deposits,  whereas  in  England  the  paid-up 


559 


National    Monetary     Commissio 


n 


capital  constituted  only  about  10  per  cent  of  deposits  of 
all  kinds  (fremde  Gelder).™ 

The  2,746,000,000  marks  of  deposits  in  the  German 
credit  banks  were  more  than  fully  covered  by  the  share 
capital  and  the  surplus.534 

As  far  as  the  eight  great  banks  are  concerned,  the  pro- 
portion between  deposits  of  all  kinds  (liabilities)  to  share 
capital  and  to  share  capital  plus  surplus,  or  to  the  bank's 
own  operating  capital  (eigenes  werbendes  Kapital) ,  may  be 
seen  from  the  following  table: 


Banks. 

Share  cap- 
ital (1,000 
marks)  . 

Share  cap- 
ital plus 
surplus,  i.e., 
own  op- 
erating 
capital 

(l.OOO 

marks)  . 

Deposits 
(Fremde 
Gelder) 
(1,000 
marks)  . 

Liabilities  in  per 
cent  of  the  — 

Share 
capital 

=  100. 

Capital 
plus 
surplus 

=  100. 

200,  000 

180,  ooo 
170,000 
154,  ooo 

145,  ooo 
no,  ooo 
85,  ooo 

80,  ooo 

301,  831 
231,50° 
227,593 
184,358 

179,  157 
144,  500 
97,  702 

92,  820 

i,  274,648 
599,643 
463.551 
395,  122 

297,440 
209,  103 

210,  179 

184,458 

637 
333 
273 

257 

205 
190 
247 

229 

422 
259 
204 
214 

166 
145 
215 

198 

Dresdner  Bank  

Disconto-Gesellschaf  t  

Bank  fiir  Handel  u.  Industrie. 
Schaaffhausen'scher  Bankve- 

Berliner  Handels-Gesellschaft. 
Comm.-u.  Discontobank  
Nationalbank    fiir    Deutsch- 
land  

It  goes  without  saying  that  the  own  resources  of  the 
German  credit  banks  have  grown  far  less  than  the  liabil- 
ities, for  it  must  be  borne  in  mind  that  during  periods  of 
depression,  when  only  small  dividends  were  paid,  fresh 
issues  of  stock  were  altogether  out  of  question.  At  all 
events,  there  was  no  inducement  then  for  working  with 
excessively  large  capital  on  which  no  adequate  returns 
could  be  expected. 


560 


The     German     Great    Banks 

The  surplus  funds  alone  of  all  credit  banks  steadily 
increased  from  12.90  per  cent  of  the  share  capital  in  1885 
to  22.90  per  cent  in  1908,  amounting  then  to  607,070,000 
marks.  In  the  case  of  the  Berlin  banks  these  percentages 
grew  from  17  per  cent  in  1885  to  29.10  per  cent  in  1908. 

It  is  my  opinion,  however,  that  this  splendid  showing 
is  due  not  so  much  to  the  superiority  of  our  banking 
methods,  as  is  thought  by  Ed.  Wagon,535  as  to  the 
excellence  of  our  corporation  laws.  These  surplus  funds 
contribute  at  present  more  than  iX  per  cent  of  the  divi- 
dend earnings  of  all  the  banks  and  1.73  per  cent  (as  against 
1.87  per  cent  in  1906)  of  the  dividend  earnings  of  the 
Berlin  banks. 

It  should  be  stated,  though,  that  while  the  share  capi- 
tal and  surplus  are  "guaranties,"  and  while  the  increase 
in  their  size  improves  the  financial  condition  of  the  bank 
and  diminishes  the  danger  of  bankruptcy,  yet  they,  as 
well  as  the  part  of  the  debits  which  is  not  required  to 
meet  the  claims  of  creditors,  are  on  the  main  guaranties 
for  the  stockholders. 

(c)    THE    LIQUIDITY  OF  THE  RESOURCES    OP    THE    GERMAN     CREDIT    BANKS 

COEFFICIENT  OF  LIQUIDITY  (Liquiditdtsschlussel). 

The  guaranties  for  the  creditors,  especially  for  the 
depositors,  are  represented  in  the  first  place  by  those 
assets  in  which  the  capital  of  the  bank  is  invested,  since 
the  creditors  must  have  assurance  not  merely  of  the  sol- 
vency of  the  bank,  but  even  more  so,  that  their  demand 
claims  will  be  paid  upon  presentation  and  that  the  other 
claims  which  are  due  on  stated  terms  will  be  met  when  due. 
In  other  words,  the  security  of  the  creditors,  especially  of 

90311°— ii 37  561 


National    Monetary     Commission 

the  depositors,  depends  primarily  upon  the  amount  of 
liquid  assets  which  the  bank  possesses  and  the  mode 
of  their  investment.536 

The  liquid  assets  for  securing  the  demand  and  short- 
term  liabilities  must  be  large  enough  and  of  such  a  kind 
that  the  bank  may  be  able  to  pay  without  delay  those 
liabilities,  the  presentation  of  which  might  be  expected 
during  a  crisis.  The  question  as  to  what  percentage  is 
likely  to  be  presented  for  payment  during  a  crisis  can  be 
answered  only  according  to  rules  of  probability,537  differ- 
ing according  to  circumstances  (time,  state  of  the  mar- 
ket, etc.),  which  are  learned  only  from  practical  experi- 
ence, change  with  it,  and  can  not  therefore  be  fixed  by 
law.  Similarly  only  experience  during  a  long  period  can 
teach  what  kind  of  assets  may  be  regarded  in  a  general 
way  as  liquid  assets,  though  it  is  much  easier  to  deter- 
mine those  which  can  not  be  so  regarded. 

It  is  perfectly  obvious,  therefore,  that  there  is  no  fixed 
method  of  calculating  the  degree  of  liquidity  applicable 
at  all  times  and  places  and  to  all  institutions.  Any 
method  may  and  will  be  objected  to  in  one  point  or 
another.  There  is  the  further  drawback  that  the  manner 
in  which  the  balance  sheets  are  drawn  up  have  varied 
greatly,  at  least  until  the  most  recent  period.  Moreover, 
there  is  no  means  of  telling  to  what  extent  the  various 
items  which,  like  bills,  contango,  advances  on  collateral, 
may  be  regarded  generally  as  liquid  assets,  contain  amounts 
that  are  not  liquid,  and  inversely,  to  what  extent  an  item 
which,  as  a  rule,  does  not  come  under  the  general  head 
of  liquid  assets  does  not  comprise,  in  any  concrete  instance, 
consols  or  other  securities  which  can  be  quickly  realized 
under  all  circumstances  or  at  least  during  normal  times. 


562 


The     German     Great    Banks 

Finally,  in  calculating  the  degree  of  liquidity,  exact 
and  correct  results  may  be  obtained  only  if  a  distinction 
is  made  between  the  daily  liabilities,  including  commer- 
cial deposits,  and  those  which  fall  due  after  some  time, 
since  it  is  only  the  former  which  require  security  by 
means  of  quick  assets,  while  the  latter  may  be  properly 
secured  by  those  assets  which  will  be  realized  on  some 
future  date.538 

After  these  preliminary  remarks  we  may  state  that, 
according  to  the  method  most  commonly  used  in  calcu- 
lating the  liquidity  of  bank  resources,  the  liabilities 
include  the  following  items: 

Credits  on  current  account,  including  acceptances, 

Deposits  (Depositen), 

Claims  to  net  profits,  undivided  at  the  end  of  the  busi- 
ness year; 

while  the  liquid  assets  include: 

Cash  on  hand, 

Contango  and  loans  secured  by  collateral  (the  two, 
however,  appearing  in  most  balance  sheets  under  one 
common  head), 

Bills, 

Securities. 

Debits  on  current  account  are  not  included  among  the 
liquid  assets. 

There  is  no  doubt  that  this  method,  which  is  followed 
by  the  daily  press,  especially  the  Frankfurter  Zeitung, 
and  special  periodic  publications,  as  the  Deutscher  Oekon- 
omist,  is  extremely  schematic,  as  no  distinction  is  drawn 
in  the  case  of  credits  on  current  account  and  deposits 
between  those  claims  which  are  daily  due  and  those  which 


563 


National    Monetary     Commission 

fall  due  at  a  later  date.  Nor  is  it  borne  in  mind  that  as  a 
rule,  even  during  critical  times,  the  majority  of  the  clients 
will  forward  to  the  bank  at  maturity  funds  to  secure  the 
payment  of  their  acceptances.  The  scheme  is  also  faulty 
for  the  reason  that  it  includes  among  liquid  assets  all 
securities — an  altogether  too  optimistic  an  assumption — 
while  it  excludes  all  debits  on  current  account,  notwith- 
standing that  even  during  critical  times  a  great  number  of 
the  debtors  may  be  expected  to  pay  up  their  due  debts 
within  reasonable  time  after  demand. 

All  these  faults  of  classification  are,  however,  of  no 
serious  account,  since  the  errors  are  not  only  in  favor 
of  greater  liquidity  (as,  for  instance,  when  securities  are 
included  among  the  liquid  assets)  but  also  against  it539 
(as,  for  instance,  when  all  debits  on  current  account  are 
excluded  from  among  the  liquid  assets  and  all  accept- 
ances are  included  among  the  liabilities),  and  thus  com- 
pensate each  other  to  a  certain  extent;  also  because  the 
same  methods  of  calculation  are  used  in  the  comparison 
of  the  more  recent  with  the  older  balance  sheets. 

This  can  be  proved  arithmetically  by  changing  slightly 
the  schedule  so  as  to  avoid  the  errors  named,  for  instance, 
by  omitting  acceptances  from  the  liabilities  or  consider- 
ing them  only  to  the  extent  of  one-third  of  the  total,  by 
including  at  the  same  time  among  the  liquid  assets  debits 
on  current  account  to  the  extent  of  one-half  or  one-third 
of  the  total,  and  by  including  not  the  total  securities,  but 
only  one-third  or  10  per  cent  of  that  total.  It  will  be 
seen  that  even  with  such  a  change  of  the  schedule  very 
similar  results  will  be  obtained. 


564 


The     German     Great    Banks 

According  to  the  customary  schedule  the  coefficient  of 
liquidity — that  is,  the  proportion  of  the  immediately 
available  or  quick  assets  to  all  liabilities,  without  dis- 
tinction between  those  daily  due  or  those  maturing  after 
some  time540  has  been  as  follows  since  1893: 


For  all 
German 
credit 
banks. 

For  the 
Berlin 
banks. 

For  all 
German 
credit 
banks. 

For  the 

Berlin 
banks. 

1893 

Per  cent. 
85 

Per  cent. 

88 

1901  

Per  cent. 

70 

Per  cent. 
70 

1894  

81 

83 

1902  

72 

76 

jgoe 

73 

1903 

67 

71 

1896 

73 

75 

1904  

66 

70 

1897  

75 

79 

1905  

62 

65 

1898 

76 

1906 

61 

63 

1899 

73 

78 

1907  

60 

63 

1908 

62 

64 

The  proportion  has  grown  constantly  worse  during  the 
last  fifteen  years  (except  for  the  years  1896,  1897,  and 
1902)  up  to  1907,  and  it  is  mainly  this  fact  which  supplies 
grist  to  the  mills  of  the  heterogeneous  elements  opposing 
our  present  banking  system.  There  can  be,  however,  no 
doubt  that  this  falling  off  can  be  traced  on  the  one  hand 
to  the  strong  concentration  movement  in  banking  and 
industry,  particularly  characteristic  of  this  period,  and  on 
the  other  to  the  unexpectedly  large  demands  of  industry 
and  the  accompanying  growth  of  speculation.  It  would 
not  be  difficult  to  trace  in  detail  the  influence  of  the 
above  factors  through  the  growth  of  debits  on  current 
account  and  the  long-term  credits.  The  working  of  the 
first  factor,  particularly  in  the  shape  of  the  so-called  com- 
munities of  interest,  is  discernible  in  the  increase  of  the 


565 


National    Monetary     Commission 

permanent  participations ;  the  two  last  factors  are  mainly 
responsible  for  the  growth  of  debits  on  current  account 
and  of  acceptances.  The  expectation  seems,  however, 
justified  that  with  the  abatement  of  the  concentration 
movement  and  the  strengthening  of  the  numerous 
branches,  agencies,  etc.,  founded  by  the  banks  during  the 
period,  all  of  which  make  large  demands  upon  the  parent 
institutions  until  they  are  able  to  stand  on  their  own  feet, 
these  items  will  show  some  reduction.  An  adverse 
change  in  industrial  activity  may  contribute  to  the  same 
result  while  causing  a  similar  reduction  of  the  bank  dis- 
count and  general  interest  rate.  The  picture  presented 
by  the  balance  sheets  of  the  banks  must  necessarily  reflect 
that  of  the  entire  national  economy,  since  the  banks  are 
the  cash  keepers  of  the  nation.  It  is,  therefore,  hardly  in 
accord  with  the  truth  to  speak  of  or  object  to  the  banks 
as  the  "leaders  of  national  enterprise"  or  of  domestic 
economic  activity. 

As  it  is  the  above  table  shows  that  the  proportion  of  the 
quick  assets  of  the  banks  to  their  liabilities  or  the  coeffi- 
cient of  liquidity  of  their  resources  even  for  the  worst 
year  of  the  period  (1907)  was  60  per  cent  for  all  credit 
banks,  taken  as  a  whole,541  and  63  per  cent  for  the 
Berlin  banks.  That  is  to  say,  the  liabilities  of  the  Ger- 
man credit  banks  to  the  extent  of  almost  two-thirds  of 
the  total  were  secured 542  by  liquid  resources.543 

The  coefficient  of  liquidity  in  1907  for  11  great  Berlin 
banks  has  been  calculated  by  Heinemann  in  an  article  in 
the  Nation  (No.  32,  dated  May  7,  1898)  at  61  per  cent, 
while  for  1 906 544  (by  disregarding  the  item  of  securities) 545 
he  reckons  it  at  a  little  over  50  per  cent.  Similarly  A.  Kop- 


566 


The     German     Great    Banks 

pel,  writing  for  the  Plutus  of  May  26,  1906,  figures  out  a 
decrease  of  liquidity  for  the  5  largest  banks  from  75  per 
cent  at  the  end  of  1890  to  50  per  cent  at  the  end  of  1905. 
In  this  calculation  he  fails,  however,  to  include  securities 
among  the  assets,  while  including  among  the  liabilities 
even  the  so-called  Avale  (i.  e.,  bank  sureties  for  the  pay- 
ment of  railway  freights,  excise,  and  import  duties). 

An  article  of  the  Frankfurter  Zeitung,  dated  April  4, 
1907  (No.  93),  discussing  the  coefficient  of  liquidity  for  45 
>anks  (9  Berlin  great  banks  and  36  provincial  banks,  each 
of  them  with  a  minimum  capital  of  10,000,000  marks), 
with  a  total  nominal  capital  of  2,198,800,000  marks,  fol- 
lows the  customary  method  (without,  however,  considering 
the  net  profits)  and  places  this  coefficient  at  67.8  per  cent 
for  the  8  Berlin  great  banks,  arriving  thus  at  the  same 
proportion  of  two-thirds  security  for  the  outstanding 
liabilities. 

Finally,  the  Deutscher  Oekonomist  of  November  23, 
1907,  page  561,  by  using  the  customary  method  of  calcu- 
lation, but  omitting  acceptances  from  the  liabilities  and 
securities  from  the  liquid  assets,  places  the  coefficient  of 
liquidity  on  December  31,  1906,  for  143  banks,  with  a 
minimum  capital  of  1,000,000  marks  each,  also  at  about 
two-thirds  (credits  on  current  account  and  deposits, 
6,304,000,000  marks;  cash  on  hand,  bills,  and  loans  on 
collateral,  4,043,000,000  marks).  Almost  the  same  result 
would  have  been  attained  by  reckoning  in  the  case  of 
these  143  banks  the  acceptances  among  the  liabilities  at 
the  ratio  of  one-third  of  the  total  and  placing  with 
deposits  and  net  profits  the  credits  on  current  account 
at  the  ratio  of  one-half  of  the  total,  i.  e.,  by  considering 


567 


National    Monetary     Commission 

merely  the  immediate  liabilities  (as  distinct  from  those 
maturing  after  some  time),  according  to  the  average 
ratio  between  the  two  and  by  including  among  the  liquid 
assets;  besides  cash  on  hand,  bills,  and  loans  on  collateral, 
including  contango,  also  one-third  of  the  securities,  but 
excluding  from  the  liquid  assets  any  debits  on  current 
account.  The  amounts  thus  obtained  are  7,394,000,000 
marks  of  liabilities,  as  against  4,406,000,000  marks  of 
quick  assets. 

These  results  tally  fairly  well  with  the  coefficient  of 
liquidity  of  62.76  per  cent,  which  Waldemar  Mueller  as- 
sumed for  45  banks  with  a  minimum  capital  of  10,000,000 
marks  each,  at  the  Hamburg  bankers'  convention,  although 
he  counted  among  the  liquid  assets  one-half  instead  of  one- 
third  of  the  securities  and  omitted  the  net  profits,  but,  on 
the  other  hand,  placed  among  the  liabilities  all  credits  on 
current  account.  By  excluding  the  total  of  acceptances 
from  the  liabilities,  which  I  regard,  however,  as  improper, 
he  obtained  an  even  higher  coefficient  of  liquidity  of  81.92 
per  cent. 

It  will  hardly  be  denied  that  the  coefficient  of  about 
two-thirds  obtained  by  the  various  methods,  even  for  the 
worst  year,  unless  the  methods  used  were  altogether  arbi- 
trary, is  sufficiently  satisfactory,  although  in  this  regard 
conditions  in  the  English  banks,  for  reasons  already 
stated,  are  far  more  favorable.  But  even  for  the  German 
credit  banks  the  coefficient  would  be  far  more  favorable 
if  we  compared  their  quick  assets  merely  with  their  imme- 
diate liabilities.  This,  however,  is  impracticable,  at  least 
for  the  present,  since  the  balance  sheets  of  many  banks 
contain  no  information  on  that  point. 


568 


r 


he     German     Great    Banks 


The  composition  of  the  liquid  assets  may  likewise  be 
regarded,  on  the  whole,  as  satisfactory. 

On  December  31,  1908,  cash  on  hand  in  all  banks 
amounted  to  537,500,000  marks,546  i.  e.,  almost  to  8  per 
cent  of  the  7,256,000,000  marks,  the  combined  credits  on 
current  account  and  deposits,  exclusive  of  acceptances. 
In  England,  as  we  saw,  even  the  best  joint-stock  banks 
show  a  cash  reserve  of  only  5  to  10  per  cent,  whereas  the 
majority  of  the  banks  have  no  amounts  which  may  be 
regarded  as  reserves  in  the  sense  used  by  Edgar  Jaffe.  In 
the  case  of  the  German  banks,  the  item  cash  is  supple- 
mented by  the  bill  holdings,  which  on  an  average 547  present 
a  very  satisfactory  amount,  amounting  to  2,742,400,000 
marks,  on  the  above  date,  so  that  on  December  31,  1908, 
the  items  cash  and  bills  alone  constituted  3,279,900,000 
marks,  as  against  deposits  of  2,745,800,000  marks. 

The  statement  was  made  and  assiduously  propagated 
in  the  foreign  press  that  part  of  the  funds  entrusted  to  the 
banks,  and  even  part  of  the  deposits,  are  being  used  in 
syndicate  operations  or  speculation.  This  is  refuted  by 
the  mere  fact  that  at  the  end  of  1908  the  combined  total 
of  the  items — securities,  mortgages,  and  syndicate  partici- 
pations— in  the  case  of  the  above-mentioned  143  (169  in 
1908)  credit  banks,  with  a  minimum  capital  of  1,000,000 
marks  each,  was  1,298,052,000  marks,  or  less  than  one- 
third  of  the  combined  capital  and  surplus  funds  of  these 
banks,  viz,  3,253,673,000  marks.548  About  two-thirds  more 
of  this  amount  would  therefore  have  to  be  invested  in  this 
manner  before  there  could  be  any  talk  that  outsiders' 
funds,  not  to  speak  of  deposits,  were  invested  in  specula- 
tive securities  or  participations. 


569 


National    Monetary     Commission 

The  above,  it  is  hoped,  will  afford  sufficient  proof  that 
neither  the  amount  nor  the  composition  of  the  liquid 
resources,  nor  the  coefficient  of  liquidity  afford  any  cause 
for  demanding  the  "reform"  of  our  banks  for  the  sake 
of  increasing  the  security  of  the  deposits.  Finally,  the 
statement,  that  the  combination  of  the  deposit  business 
with  the  promoting  and  issuing  business  has  led  to  grave 
losses,  is  correct  only  to  the  extent  that  in  a  number  of 
failures  of  credit  banks  as  well  as  cooperative  credit 
societies  and  private  banking  firms  depositors  have  also 
suffered.  So  far  as  private  firms  were  concerned,  these 
failures  were  brought  about  by  the  criminal  acts  of  the 
bank  management,  which  had  no  connection  whatever 
with  promoting  or  issuing  transactions.  Similar  expe- 
rience, only  on  a  larger  scale,  was  had  with  the  English 
deposit  banks  and  is  not  likely  to  be  avoided  through  any 
legal  regulations. 

The  figures  of  such  losses  as  given  by  Otto  Warschauer549 
brought  down  to  the  year  1907  by  the  managing  partner 
of  the  Disconto-Gesellschaft,  Dr.  Arthur  Salomonsohn, 
were  presented  to  the  bankers'  convention  at  Hamburg.550 
These  data,  the  accuracy  and  completeness  of  which 
will  hardly  be  doubted,  relate  to  nine  credit  banks, 
nearly  all  of  them  with  very  small  capital,  and  two  other 
institutions,  the  Hannover scher  Hypothekenverein  and  the 
Spar-und  Vorschussbank,  in  Dresden,  which  either  at  the 
opening  of  bankruptcy  proceedings  or  before  were  coop- 
erative societies.  The  total  losses  sustained  by  depositors 
by  reason  of  all  these  failures  during  the  fourteen  years 
between  1894  and  1907  are  calculated  at  about24,ooo,ooo 
marks.  It  is  rather  difficult  to  ascertain  the  proportion 


The     German     Great    Banks 

which  these  losses  bore  to  the  total  deposits  of  the  German 
credit  banks. 

It  would  not  be  correct  to  compare  the  total  losses  with 
the  amounts  due  to  the  depositors  on  December  31  of 
each  of  these  fourteen  years,  since  the  amount  for  each 
successive  year  includes  those  for  the  preceding  years. 
Even  if  only  the  amount  for  December  31,  1906  (2,700,- 
000,000  marks) ,  were  taken  the  total  would  be  altogether 
too  small.  For  what  we  are  concerned  with  are  the  total 
amounts  deposited  during  each  year,  and  these  naturally 
will  be  much  larger  in  view  of  the  withdrawals,  which  are 
especially  heavy  during  the  last  months  of  the  year. 
This  maximum  amount  of  2, 700, 000,000  marks  represents, 
therefore,  a  total  far  below  the  actual  amounts  deposited. 

On  the  other  hand,  the  total  loss  of  24,000,000  marks, 
as  estimated  by  Salomonsohn  is  probably  far  too  high, 
since  according  to  his  explanation  the  claims  of  the 
depositors  were  figured  from  the  last  bank  statements 
preceding  the  failures.  In  many  cases,  however,  the 
opening  of  bankruptcy  proceedings  is  preceded  by  a  run, 
during  which  part  of  the  deposits  is  repaid.  It  is  plain, 
therefore,  that  the  amount  of  deposits — of  which  only 
part  represents  savings  deposits — is  estimated  too  low, 
while  the  losses  are  estimated  too  high.  But  even  if  we 
accept  both  figures  without  change  and  divide  the  total 
loss  of  24,000,000  marks  by  the  total  deposits  of  2,700,- 
000,000  marks  it  will  be  seen  that  the  average  loss  on  all 
bank  deposits  in  the  German  Empire  during  the  fourteen 
years  from  1894  to  1907  was  about  nine-tenths  of  i  per 
cent;  in  other  words,  of  every  100  marks  deposited  during 
the  fourteen  years,  from  1894  to  1907,  not  quite  90 


National    Monetary     Commission 

pfennigs  was  lost.  This  period  includes  the  crisis  years 
of  1901  and  1906,  during  which  the  German  banks  and 
banking  system,  on  the  whole,  proved  their  utmost  sound- 
ness despite  all  difficulties  and  dangers.  It  is  true  that 
subsequently,  in  1907  and  1908,  new  important  cases 
occurred,  when  banking  institutions  which  were  receiving 
deposits  failed  and  the  depositors  suffered  losses.  Accord- 
ing to  my  own  inquiries  these  cases  include  29  private 
banking  establishments,  n  registered  cooperative  credit 
societies  with  limited  liability,  i  industrial  bank,  i  savngs 
and  credit  bank,  2  loan  and  credit  societies,  i  people's 
bank,  not  registered  as  a  limited  credit  society,  and  only 
2  credit  banks,  viz,  the  Solinger  Bank  in  Solingen  and  the 
Banner  Bank  fur  Handel  und  Gewerbe  in  Bonn.551 

After  the  foregoing  discussion  it  would  seem  rather 
unreasonable  to  maintain  that  deposits  are  being  used 
for  syndicate  participations  or  speculative  operations  or 
that  "grave  losses"  have  been  caused  to  German  deposi- 
tors by  our  banks  and  banking  system,  and  to  demand  in 
the  same  breath  the  introduction  of  special  deposit  banks 
or  special  safeguards,  the  more  so,  as  failures  have  by  no 
means  been  Tare  even  among  the  special  deposit  banks  in 
England.  It  is  not  surprising  that  the  constant  reitera- 
tion of  such  statements,  hurtful  to  German  credit  abroad, 
in  the  long  run  finds  a  loud  echo  in  foreign  countries, 
which  are  only  too  anxious  for  such  news,  and  that  even 
the  lyondon  Economist  could  treat  his  readers  in  a  recent 
issue  to  the  news  that  the  German  banks  were  "investing 
their  deposits  in  mortgages."552 


572 


The     German     Great    B 


a  n 


II.    CRITICISM  OF   THE    INDIVIDUAL   REFORM   PROPOSALS. 

I.  THE  CREATION  OF  A  CENTRAL  PRIVATE  DEPOSIT  BANK  OR  OP  A  GOV- 
ERNMENT DEPOSIT  BANK  FOR  THE  GERMAN  EMPIRE  AND  OF  SIMILAR 
DEPOSIT  BANKS  FOR  EACH  OF  THE  GERMAN  STATES. 

In  order  to  bring  German  banking  into  conformity 
with  the  English  model,  Caesar  Straus  proposes  the  crea- 
tion of  a  private  central  deposit  bank  and  Otto  War- 
schauer  the  establishment  of  a  government  deposit  bank 
for  the  German  Empire  alongside  of  a  series  of  deposit 
banks  for  the  individual  States. 

In  view  of  the  above  discussion  and  the  German  and 
English  experience  in  this  field,  the  change  does  not  seem 
justified  in  the  interests  of  greater  security  for  the  depos- 
itors. Furthermore,  the  proposed  changes  are  either 
impracticable  or  dangerous.  Straus's  idea  of  a  central 
(einheitliche)  deposit  bank  is  impracticable,  even  if  only 
for  the  reason  that  neither  the  German  great  banks, 
nor  the  other  banks  or  bankers,  are  likely  to  join  in  the 
foundation  of  such  a  central  bank,  since,  being  more  con- 
servative in  their  business  views,  they  believe  that,  con- 
trary to  Warschauer's  calculations,  such  a  bank  for  the 
present  and  a  considerable  time  to  come  is  not  likely  to 
prove  profitable. 

The  idea  is  impossible  of  realization,  also,  because  the 
Reichsbank,  for  obvious  reasons,  will  never  agree  to  trans- 
act the  business  of  the  deposit  bank  in  those  places, 
where  the  former  only,  but  not  the  latter,  may  have 
branches  of  its  own.  If  I  am  rightly  informed  the  pro- 
posal met  with  scant  favor  at  the  time,  just  in  the  last- 
mentioned  quarter. 


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National    Monetary     Commission 

For  various  reasons  the  Warschauer  proposal  of  an 
imperial  special  government  deposit  bank,  either  singly  or 
in  conjunction  with  like  banks  for  the  individual  States, 
is  likely,  at  least  for  the  time  being,  to  share  the  same 
fate.553  In  the  first  place  our  authorities  would  hardly 
disregard  the  reasoning  that  it  would  not  do  to  substitute 
bodily  a  foreign  credit  system,  which  owes  its  develop- 
ment to  special  local  conditions,  for  a  domestic  system, 
which  is  no  less  the  result  of  peculiar  conditions  at  home. 
It  will  also  be  recognized  that  our  banks  have  had  a  con- 
siderable share  in  the  brilliant  economic  development 
during  the  last  decades,  and  that,  therefore,  any  attempt 
to  paralyze  their  activity  is  likely  to  inflict  grave  injury 
on  our  national  industry.  There  will  be  the  more  hesi- 
tation about  making  the  change  when  it  is  borne  in  mind 
that  the  coming  decades  will  undoubtedly  bring  a  very 
severe  struggle  for  our  national  industry  against  foreign 
competition,  in  which  the  unimpaired  assistance  of  our 
banks  will  be  needed  more  than  ever  before. 

Nor  is  it  likely  that  there  will  be  much  sympathy  with 
any  plan  that  is  likely  to  diminish  the  "highly  appre- 
ciated" and  always  welcome  ability  of  our  banks  to  con- 
tribute their  share  of  taxation.  In  the  case  of  the  Reichs- 
bank,  which  has  had  to  pass  through  a  severe  struggle 
with  the  competing  note  banks,  there  would  be  the 
additional  danger  that  the  newly  established  state  de- 
posit banks  might  interfere  with  and  thwart  its  discount 
policy.  That  such  a  danger  exists,  is  shown  by  conditions 
in  England,554  where  the  Bank  of  England's  own  bill 
business  has  been  declining  for  some  years  past,  and 
where  the  bank,  owing  largely  to  competition  with  the 

574 


The     German     Great    Banks 

large  deposit  banks,  is  compelled  to  discount  bills  at  the 
prevailing  market  rate,  which  in  most  cases  comes  nowhere 
near  the  official  discount  rate.  It  may  also  be  shown  that 
the  Bank  of  England  no  longer  controls  the  market  for 
loans  on  collateral,  as  the  large  deposit  banks  find  it 
possible  to  supply  the  market  with  vast  amounts  for  such 
loans  and  are  thus  in  a  position  to  oppose  successfully 
any  increase  of  the  discount  rate  which  the  Bank  of  Eng- 
land might  deem  expedient.  Thus  it  has  come  to  pass 
that  of  all  the  functions  devolving  upon  it,  and  of  which 
no  one  can  be  eliminated  without  injury  to  the  commu- 
nity, the  Bank  of  England  exercises  successfully  only  one, 
viz,  the  regulation  of  the  currency. 

This  also  proves  the  error  of  the  writers  who  hold555 
that  "no  conflict  of  interests  between  the  Reichsbank 
and  a  private  central  deposit  bank  need  be  feared,"  that, 
on  the  contrary,  "they  have  common  Interests,"  and  that 
both  institutions,  with  the  Reichsbank  as  "the  leading 
institution,"  would  "cooperate  in  maintaining  and  sup- 
porting the  proper  monetary  circulation  "  of  the  country. 
The  establishment  of  state  deposit  banks  would,  more- 
over, involve  a  radical  change  for  the  worse,  and  not  for 
the  better,  of  the  entire  German  banking  system. 

It  is  not  likely  that  the  German  credit  banks  will  re- 
sort to  any  measures  of  self-protection  during  the  early 
stages,  believing,  no  doubt,  that  for  some  time  at  least, 
their  deposit  business  will  not  be  seriously  endangered  by 
the  fresh  competition.  Should,  however,  the  founding  of 
government  deposit  banks,  or  even  a  more  energetic  quest 
after  deposits  on  the  part  of  the  Seehandlung  and  other 
state  institutions,  come  to  be  regarded  as  a  serious  danger 


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National    Monetary     Commission 

to  their  own  deposit  business,  the  credit  banks  would,  as  a 
matter  of  course  and  of  self -protection,  have  to  enter  the 
competitive  struggle  with  all  the  means  at  their  disposal. 
In  such  a  case  they  would  proceed  to  transform,  as  far 
as  practicable,  their  present  deposit  departments  into 
separate  deposit  banks  or  to  found  new  ones,  and  in 
either  case  take  over  or  keep  the  control,556  management, 
and  shares  of  the  new  deposit  banks. 

We  should  then  have  an  imperial  deposit  bank,  deposit 
banks  for  the  individual  States,  and  a  large  number  of 
competing  private  deposit  banks,  all  of  which,  including 
the  state  and  private  banks,  would  be  compelled  to  cover 
the  country  with  a  network  of  branches.  Sooner  or  later 
all  these  institutions,  possibly  in  conjunction  with  the 
then  surviving  state  note  banks,  would  be  found  seriously 
hampering,  if  not  entirely  blocking,  the  discount  policy 
of  the  Reichsbank.557  This,  contrary  to  Ad.  Weber 
(op.  cit.,  p.  262),  we  regard  by  no  means  as  a  "cum  pos- 
terior." Such  a  picture  of  the  future  is  by  no  means  ex- 
aggerated, if  we  are  to  judge  by  English  experience. 
Warschauer's  proposal  is  based  upon  the  erroneous  view 
that  our  banking  system  is  inferior  to  the  English  system 
and  must  give  place  to  the  latter.  In  order  to  refute 
his  views,  it  may  suffice  to  state  that  for  a  long  time  the 
English  have  been  energetically  demanding  a  reform  of 
their  own  banking,  while  pronouncing  our  system  su- 
perior to  their  own,  until  their  usual  keenness  of  percep- 
tion became  blunted  by  the  agitation  which  had  sprung  up 
in  our  own  midst.  As  late  as  July,  1906,  the  following 
expressions  were  used  in  an  article  on  "The  future  of 
international  banking,"  which  appeared  in  the  Bankers' 
Magazine  (No.  748,  p.  51): 


576 


The     German     Great    Banks 

11  In  Germany  we  find  a  banking  policy  which,  though 
in  minor  points  borrowed  from  other  countries,  differs 
essentially  from  all  others  in  giving  full  expression  to  the 
national  genius.  It  is  as  scientific  and  thoroughly  coor- 
dinated as  English  banking  is  unscientific  and  haphazard. 
German  banking  does  not  stand  aloof  from  industry  and 
commerce,  as  ours  does.  The  three  are  all  closely  asso- 
ciated. They  have  a  common  understanding  and  a 
strong  sentiment  of  solidarity." 

This  is  a  foreign  opinion.558  In  Germany  the  mere 
fact  that  a  hen  is  laying  golden  eggs  suffices  to  call  forth 
in  many  quarters  the  desire  to  have  it  killed. 

In  view  of  the  above  considerations  and  the  negative 
attitude  assumed  by  the  imperial  chancellor  at  the  open- 
ing of  the  deliberations  of  the  bank  inquiry  commission 
toward  the  proposals  to  change  by  law  our  existing 
mixed  banking  system,  it  would  seem  unnecessary  to 
repeat  again  the  arguments  propounded  in  the  second 
German  edition  of  this  work  (pp.  155-160),  that  the 
profits  of  the  new  central  deposit  bank,  at  least  during 
the  early  period,  would  most  likely  be  very  moderate 
and  not,  as  Warschauer  believes,  21-22  per  cent  (!),  or 
at  least  12  per  cent.559 

2.  THE  GRANTING  OP  PRIORITY  RIGHTS  TO  DEPOSITORS. 

It  was  shown  above  that  our  past  experience  does  not 
justify  the  demand  that  priority  rights  be  granted  to 
depositors.  Such  a  demand,  even  if  better  founded, 
could  hardly  be  conceded,  as  such  a  preferment  of  depos- 
itors to  other  creditors  of  the  bank,  who  may  have  en- 
trusted their  cash  to  the  bank  in  current  account  or 

90311°— ii 38  577 


National    Monetary     Commission 

otherwise,  would  be  a  death  blow  to  the  credit  of  the 
banks.  It  may  be  also  argued  against  it  that  the  very 
conception  of  deposits  is  not  fixed  either  in  theory  or  in 
practice  and  still  less  defined  in  law  with  regard  to  their 
manifold  and  constantly  varying  relations  to  credits  on 
current  account,  contango,  etc.560 

3.  THE  FIXING  OF   A  LEGAL   RATIO  BETWEEN  SAVINGS  DEPOSITS  AND 
THE  SHARE  CAPITAL. 

The  objection  to  a  fixed  ratio  between  share  capital 
and  deposits  "in  so  far  as  they  are  savings  deposits"  is 
directed  mainly  against  Warschauer,561  who  advocates  a 
scheme  similar  to  that  legally  prescribed  for  our  mort- 
gage banks. 

This  scheme  would  be  unacceptable  even  if  the  words 
"in  so  far  as  they  are  savings  deposits"  were  omitted. 
As  a  matter  of  fact,  while  it  might  have  been  desirable  to 
fix  such  a  ratio  in  the  case  of  the  mortgage  banks,  which 
are  engaged  in  what  may  be  called  the  standard  business 
of  issuing  mortgage  bonds,  such  or  other  regulations  would 
be  ill  adapted  to  the  credit  banks  with  their  innumerable 
and  constantly  varying  business  relations.  Warschauer's 
proposal  is  based  on  the  premise  that  the  share  capital 
(he  wrongly  disregards  entirely  the  surplus  funds)  ought  to 
bear  a  certain  ratio  to  the  deposits,  whereas  it  was  demon- 
strated above  that  the  foremost  protection  of  the  creditors, 
including  depositors,  are  the  liquid  assets582  and  not  the 
capital  (and  surplus),  and  that  in  Germany  large  share 
capitals  are  required  mainly  in  view  of  the  diversity  of 
business  transacted  by  our  banks.  This  view  is  shared 
in  England,  to  which  our  opponents  are  in  the  habit  of 
turning  for  their  authority. 

578 


The     German     Great    Banks 

4.  LEGAL  REGULATIONS  REGARDING  THE  INVESTMENT  OF  DEPOSITS. 

Proposals  were  made  by  certain  experts  who  appeared 
before  the  bank  inquiry  commission  of  1908,  to  the  effect 
that  those  modes  of  investment  of  deposits  which  were 
found  correct  and  had  been  carried  out  at  that  time  by 
most  of  the  great  banks  should  be  made  the  basis  for 
legal  regulation,  as  it  was  intolerable  that  the  "  adminis- 
tration of  the  national  wealth"563  should  be  entrusted 
to  10  or  12  persons  without  any  legal  safeguards.  This 
remark  occurs  frequently  in  banking  literature  and  in 
other  connections. 

Accordingly  a  legal  regulation  is  demanded  requiring 
that  a  certain  proportion  of  the  deposits  is  to  be  invested 
in  German  government  bonds,  the  price  of  which  would 
thus  incidentally  be  raised.  As  an  alternative  it  is 
proposed  that  about  one-third  or  35  per  cent  of  the 
deposits  in  savings  banks,  cooperative  societies,  and  credit 
banks  be  required  by  law  to  be  invested  as  follows :  Twenty 
per  cent  in  bills  of  exchange  in  accordance  with  the  Reichs- 
bank  regulations,  i.  e.,  provided  with  three  signatures  and 
running  for  a  term  not  exceeding  three  months,  and  15  per 
cent  either  in  other  bills,  in  accounts  at  "  giro  "  banks,  and 
in  loans  on  collateral  not  exceeding  a  term  of  three  months 
on  securities  quoted  at  a  German  bourse  (excepting  the 
bank's  own  shares  or  those  of  a  " concern"  bank,  or  such 
securities  as  have  been  put  on  the  market  by  the  institu- 
tion in  question  within  three  years  preceding) ,  or  in  Ger- 
man state  loans  or  German  imperial  government  bonds, 
or  finally,  in  first  mortgages. 

Against  this  it  may  be  urged  that  even  if  the  above 
demand  were  complied  with,  the  depositors,  having  no 


579 


National    Monetary     Commissio 


n 


exclusive  lien  on  these  securities,  would  run  the  same 
risk  as  they  do  now  in  the  case  of  bankruptcy  or  crisis, 
the  only  difference  being  that  believing  themselves  guar- 
anteed by  law  against  all  losses  they  would  have  all  the 
more  reason  to  complain. 

Unlike  the  mortgage  banks  and  insurance  companies, 
whose  business  moves  along  beaten  paths,  the  German 
credit  banks  engage  in  an  immense  variety  of  compli- 
cated enterprises.  Hence  no  regulations  of  the  kind 
above  described  could  be  applied  to  them  without  injury 
to  the  special  activity  of  each  bank  and  of  the  credit 
business  in  general.  It  seems  impossible  to  imagine  how 
any  set  of  regulations,  suitable  for  all  times,  places,  and 
conditions,  could  be  devised  to  determine  the  manner 
in  which  the  working  capital  is  to  be  invested.  At  any 
rate,  the  attempt  to  do  so  would  be  a  very  risky  under- 
taking. Moreover,  it  is  more  than  doubtful  whether  any 
manner  of  investment  could  be  legally  prescribed  that 
would  under  all  circumstances  guarantee  the  liquidity 
of  the  investments. 

5.  DEPOSITING  A  CERTAIN  PORTION  OF  THE  PRIVATE  DEPOSITS  AT  THE 

REICHSBANK. 

Heiligenstadt's  proposal 564  that  the  credit  banks  should 
be  required  to  deposit  one  to  two  per  cent  of  the  average 
annual  amount  of  all  their  credit  items  in  cash  at  the 
Reichsbank  represents  a  totally  different  and  broader 
standpoint.  The  proportion  was  raised  to  5  per  cent  by 
some  experts  of  the  bank  inquiry  commission,  who  in  all 
other  points  adopted  bodily  the  proposal  and  its  argument. 

Starting  with  the  alleged  fact  that  on  an  average  only 
50  per  cent  (between  1895  and  1905  only  37  per  cent)  of 


580 


The     German     Great    Banks 

the  annual  national  economic  working  capital  ("volks- 
ivirtschaftliches  Betriebskapital ' ')  placed  in  the  hands  of 
the  banks  between  1886  and  1895  was  used  for  working 
purposes  in  the  shape  of  cash,  bills,  and  loans  on  collateral 
(p.  83  loc.  cit.),  Heiligenstadt  concludes  that  the  balance 
(i.  e.,  during  the  latter  period  63  per  cent)  of  the  money 
belonging  to  the  creditors  or  depositors  was  used  for  pur- 
poses of  investment;  in  other  words,  that  an  excessive 
part  of  the  nation's  working  capital  was  converted  into 
investment  capital  through  long-term  credit  or  otherwise. 

The  above  proposal  was  therefore  considered  justified, 
inasmuch  as  the  increase  of  the  capital  of  the  Reichsbank 
(the  regulator  of  the  money  circulation  and  of  the  credit 
business)  would  be  the  best  means  to  keep  an  adequate 
portion  of  German  working  capital  permanently  liquid  for 
working  purposes  (p.  87)  and  to  take  the  power  of  decid- 
ing the  mode  of  employment  of  capital,  at  least  to  a 
certain  degree,  out  of  private  hands  (p.  85). 

Thus  the  proposal  is  said  to  be  intended,  first  and  fore- 
most, to  strengthen  the  working  capital  of  the  Reichs- 
bank (p.  98,  under  X),  and  at  the  same  time  to  prevent 
the  banks  from  tying  up  an  excessive  proportion  of  their 
resources  and  thus  endangering  the  security  for  their 
liabilities  (p.  95). 

The  supporters  of  this  proposal  described  the  sum  to 
be  deposited  in  cash  at  the  Reichsbank  as  "the  national 
working  reserve,"  or  "iron  reserve"  (" eiserne  Reserve") 
which  would  enable  the  Reichsbank  to  issue  three  times 
the  amount  in  bank  notes,  the  security  for  which  could 
not  be  withdrawn,  and  by  which  the  nation  could  be 
constantly  supplied  with  liquid  working  funds. 


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National    Monetary     Commission 

When  subjected  to  analysis,  both  the  premises  on  which 
these  views  are  based  and  the  aims,  as  well  as  the  con- 
clusions arrived  at,  prove  untenable. 

As  regards  the  premises,  the  facts  set  forth  on  previous 
pages  of  the  present  work  suffice  to  disprove  the  assertion 
that  German  credit  banks  are  in  the  habit  of  tying  up  an 
excessive  part  of  their  resources  (p.  83),  and  thereby 
endanger  the  security  of  their  liabilities.  On  the  con- 
trary, we  saw  that  all  the  liabilities  of  the  German  credit 
banks  are  covered  almost  up  to  two-thirds  of  their  amount 
by  liquid  resources,  whereas  the  law  requires  that  even 
bank  notes  payable  on  sight  may  be  covered  by  cash 
reserves  only  up  to  one- third  of  their  amount. 

Heiligenstadt's  -method  of  calculating  the  coefficient  of 
liquidity  (p.  83)  is  altogether  too  unfavorable.  I  can  not 
see  on  what  ground  cash,  bills,  and  even  loans  on  collateral, 
are  by  him  considered  only  partly  as  liquid  means,  con- 
tango and  securities  being  omitted  entirely.565 

As  regards  the  purpose  aimed  at  by  the  proposal,  it  is 
not  clear  how  the  Reichsbank  (in  the  event  of  its  note- 
issuing  power  being  increased  by  the  2  per  cent  or  5  per 
cent  of  fresh  cash  funds  to  be  furnished  by  the  banks)  will 
be  able  to  keep  these  funds  in  any  more  liquid  form  than 
that  in  which  they  are  furnished  by  the  banks;  for  the 
banks  would  have  to  withdraw  these  very  cash  funds 
from  their  most  liquid  resources,  namely,  cash  balances, 
bills,  loans  on  collateral,  etc.  The  same  cash  funds  would 
thereupon  be  invested  by  the  Reichsbank  in  practically 
the  same  form,  namely,  in  bill  discounts  and  loans  on 
collateral,  for  which  it  would  issue  its  notes. 


582 


The     German     Great    Banks 

Most  probably,  however,  no  fresh  cash  would  flow  into 
the  Reichsbank  at  all  in  this  manner.  The  banks  would 
deduct  from  their  "giro"  account  (which  almost  always 
exceeds  the  contemplated  "iron  reserve")  and  place  to 
the  credit  of  the  Reichsbank  whatever  amount  they  might 
be  required  to  deposit,  just  as  they  would  probably  do  in 
case  of  a  direct  increase  of  the  Reichbank  capital  in  which 
they  were  to  participate. 

Nor  can  it  be  maintained  that  even  in  this  case  the 
Reichsbank,  by  reason  of  the  sums  placed  to  its  credit, 
would  become  possessed  of  a  permanent  security  for  a 
threefold  issue  of  bank  notes.  A  permanent  deposit,  or 
"iron  reserve,"  is  out  of  the  question  for  the  reason  that 
the  sums  which,  it  is  supposed,  can  not  be  withdrawn 
from  the  Reichsbank  directly  can  be  withdrawn  indi- 
rectly in  the  form  of  larger  loans,  through  bills,  discounts, 
or  loans  on  collateral,  or  through  deductions  from  the  giro 
balances  exceeding  the  minimum  deposit. 

During  a  crisis — and  Heiligenstadt's  proposal  is  essen- 
tially intended  for  times  of  crisis,  since  for  times  of  pros- 
perity no  reform  proposals  are  needed — very  many  de- 
posits will  be  withdrawn  from  the  banks,  and  they  will 
themselves  be  forced  to  withdraw  from  the  Reichsbank 
at  least  a  part  of  their  2  to  5  per  cent  reserve. 

But  even  if  this  were  not  the  case,  the  Reichsbank  in 
time  of  crisis,  in  order  to  prevent  a  run  or  bankruptcy, 
would  have  no  other  means  than  to  put  in  circulation  all 
or  part  of  the  "national  working  reserve,"  whereas  in 
times  when  money  is  plentiful  this  reserve  would  prove  a 
useless  ballast. 


583 


National    Monetary     Commission 

This  brings  us  to  a  question  which  is  by  no  means 
unimportant,  namely,  whether  the  2  to  5  per  cent  reserve 
at  the  Reichsbank  should  bear  interest  or  not. 

If  it  is  to  yield  interest,  then  all  the  grave  reasons 
become  valid  that  may  be  urged  against  the  acceptance 
by  a  central  note  bank  of  interest-bearing  deposits,  and 
which  have  caused  the  most  prominent  of  these  banks, 
upon  repeated  deliberation,  to  refrain  from  accepting  in- 
terest-bearing deposits.  This  attitude  is  mainly  dictated 
by  the  consideration  that,  if  the  central  note  bank  does 
not  wish  to  bear  the  loss  involved  in  the  payment  of  such 
interest — and  it  is  hard  to  see  why  it  should  bear  such 
loss  with  indifference — it  would  be  compelled  to  seek 
lucrative  business  in  the  form  of  discounting  and  loans 
on  collateral,  and  possibly  just  at  a  time  when  it  ought 
to  employ  all  the  resources  at  its  command  to  combat  an 
excessive  demand  for  credit  throughout  the  country,  es- 
pecially by  raising  the  discount  rate. 

On  the  other  hand,  if  the  2  to  5  per  cent  reserve  is  not 
to  bear  interest,  that  would  mean  a  considerable  loss  for 
the  credit  banks  carrying  those  reserves.  They,  too,  would 
of  course  not  regard  that  loss  with  indifference,  but  would 
be  compelled  to  reimburse  themselves  in  one  way  or 
another,  especially  by  paying  their  depositors  less  inter- 
est— a  decidedly  undesirable  result.  Furthermore — a  still 
more  undesirable  result  in  normal  times — they  would  have 
less  funds  to  place  at  the  disposal  of  the  credit  business. 
An  increased  demand  in  the  money  market  being  thus 
met  by  a  diminished  supply,  the  result  would  be  a  rise  in 
the  rate  of  interest.  Finally — and  this  would  be  the  most 
undesirable  result  of  all — the  banks,  judging  by  past  ex- 

584 


r 


he     German     Great    Banks 


perience,  would  probably  dimmish  their  noninterest-bear- 
ing  cash  reserves  necessary  for  their  liquidity  by  an  amount 
corresponding  to  their  share  in  the  "national  working  re- 
serve" carried  at  the  Reichsbank. 

The  ultimate  result  would  be  that  the  liquidity  of  the 
banks,  and  with  it  of  the  body  economic,  would  be  im- 
paired to  exactly  the  same  extent  that  Heiligenstadt 
intended  to  improve  it. 

In  substance,  if  not  in  form,  this  proposal  amounts  to 
the  same  thing  as  the  proposals  which  the  Reichstag  com- 
mittee, for  good  reasons,  had  rejected  on  the  occasion  of 
their  deliberations  on  the  stock-company  bill  of  iSS/j..568 
These  proposals,  which  aimed  at  prescribing  a  special  mode 
of  investing  the  legal  reserve  funds  in  cash,  or  in  trust- 
fund  securities,  were  revived  in  1901  in  an  article  in  the 
Gegenwart  by  Imperial  Bank  Director  Doctor  Vosberg. 
They  are,  however,  liable  to  serious  objections,  at  any 
rate  so  far  as  the  joint-stock  banks  are  concerned;  and 
the  same  objections,  therefore,  apply  also  to  the  proposals 
now  under  discussion.667 

If  the  banks  were  compelled  to  keep  their  surplus  in 
cash,  or  to  maintain  a  cash  reserve  at  the  Reichsbank, 
they  would  have  to  withdraw  this  sum  from  their  fully 
employed  working  capital  (for  the  suggestion  that  only 
surplus  capital  is  to  be  withdrawn  is  absurd) ,  to  wit,'  such 
assets,  as  the  bill  holdings,  securities,  etc. 

Thus  they  would  be  compelled  either  to  restrict  their 
business  operations,  i.  e.,  to  call  in  credit  previously 
granted  and  refuse  to  grant  new  credit,  a  proceeding 
which  might  lead  to  a  crisis,  especially  in  industry;  or 
they  would  have  to  attempt  to  make  good  this  deficiency 

585 


National    Monetary     Commission 

in  working  funds  by  the  issue  of  fresh  shares,  which  course, 
if  successful,  would  lead  to  a  fresh  strengthening  of  con- 
centrative  tendencies  and,  furthermore,  to  a  fresh  with- 
drawal of  ready  money  from  the  market  to  an  amount 
equal  to  the  total  value  of  the  share  issues.  If  the  attempt 
to  issue  fresh  shares  proved  unsuccessful,  the  calamitous 
state  would  continue,  namely,  the  injury  to  trade  and 
industry,  which  were  to  be  protected  by  the  proposals  in 
question.  In  many  cases,  however,  the  issue  of  fresh 
shares  would  not  be  possible,  because  the  deposit  of  ready 
money  would  either  lead  directly  to  a  curtailment  of  busi- 
ness transactions,  and  hence  of  dividends,  or  would  create 
the  fear  of  such  curtailment,  the  result  in  either  case 
being  a  fall  in  the  market  value  of  the  shares. 

If  the  banks,  despite  the  curtailment  of  business,  en- 
deavored to  obtain  satisfactory  dividends — which  is  neces- 
sarily the  aim  of  the  business  management  of  every  joint- 
stock  company — they  might  easily  find  themselves  com- 
pelled to  resort  to  hazardous  transactions,  particularly 
to  force  the  founding  and  issue  business  more  than  ever. 
Since,  moreover,  after  the  deposit  of  the  guaranty  re- 
serve, they  would  possibly  and  even  probably  pay  less 
regard  to  their  liquidity,  that  liquidity,  as  well  as  the 
quality  of  their  investments,  might  in  the  event  of  a  run 
turn  out  to  have  been  impaired  to  a  greater  extent  than 
ever.  If,  however,  securities  were  deposited  instead  of 
cash,  most  of  the  banks,  being  compelled,  in  case  of  a  run, 
to  sell  the  deposited  securities,  might  not  be  able  to  do  so 
at  all  or  only  at  a  great  loss.  If  these  happened  to  be 
trust-fund  securities  their  market  value  would  become 
unduly  depressed  during  the  time  of  panic. 


586 


The     German     Great    Banks 

Heiligenstadt's  proposals  would  thus  deprive  the  busi- 
ness community  of  productive  capital  in  two  ways — 
through  the  deposit  of  a  cash  reserve  at  the  Reichsbank 
and  through  the  issues  of  shares  that  might  become  neces- 
sary. Some  of  the  supporters  of  the  proposals  have 
already  raised  the  amount  of  the  proposed  reserve  from 
1-2  per  cent  to  5  per  cent;  in  fact,  the  amount  would  be 
variable  at  pleasure  in  an  upward  direction.  I  assume 
that  this  amount  is  to  be  deposited  at  the  Reichsbank, 
without  the  creditors  having  a  lien — that  is  to  say,  a  right 
of  segregation  of  these  deposits  (Absonderungsrecht)  in 
case  of  failure  of  the  credit  banks.  If  this  be  the  case, 
the  Reichsbank,  as  has  been  pointed  out,  would  have  to 
part  with  this  cash  reserve  in  the  case  of  a  run,  which 
might  result  in  the  claims  of  other  creditors  than  the  de- 
positors being  satisfied,  on  the  principle  of  "  first  come — 
first  served,"  and  the  depositors  might  be  turned  away 
empty  handed. 

If  this  is  not  to  be  the  case,  that  is  to  say,  if  all  creditors 
are  to  be  given  a  lien  on  the  cash  reserve,  or  the  right 
of  segregation,  then  the  Reichsbank,  according  to  general 
regulations,  would  not  be  permitted  to  part  with  this 
reserve  in  case  of  a  run,  so  that  the  failure  which  the 
cash  reserve  was  intended  to  ward  off  would  in  that  very 
case  become  inevitable. 

It  is  also  clear  from  the  above  that  the  practical  con- 
sequences of  these  proposals  would  be  directly  opposed 
to  the  efforts,  recently  made  with  such  commendable  zeal, 
of  expanding  the  check  and  transfer  system,  and  thus 
dispensing  with  the  use  of  ready  money  in  payments  and 
making  it  available  for  credit  transactions. 


587 


National    M  o  n  et  ar  y     Commission 

Again,  it  should  be  borne  in  mind  that  a  cash  reserve, 
even  of  5  per  cent  of  all  credit  accounts  at  the  Ger- 
man credit  banks,  that  is  to  say,  about  200,000,000  to 
250,000,000  marks,  could  in  nowise  influence  "the  ratio 
of  working  capital  to  invested  capital"  in  German 
trade  and  industry  to  any  appreciable  extent.  Fur- 
thermore, while  Heiligenstadt's  proposal  lays  special 
stress  on  the  strengthening  of  the  working  resources  of 
the  Reichsbank,  a  bill  (since  then  disposed  of)  "to  change 
the  bank  act"  (No.  1178  of  Reichstag  documents)  ad- 
mitted that  the  Reichsbank's  own  means  had  sufficed 
hitherto  for  the  purposes  they  were  intended  to  serve, 
and  that  consequently  there  was  no  need  of  increasing 
them.  Accordingly  provision  has  been  made  merely  for 
a  gradual  increase  in  the  working  resources,  by  a  gradual 
strengthening  of  the  surplus.  Lastly,  it  must  not  be 
forgotten  that  the  Reichsbank  will,  as  a  matter  of  fact, 
be  placed  in  possession  of  considerable  and  increasing 
working  resources,  through  an  agreement  by  which  it 
undertakes  the  administration  of  the  sums  which  the 
postal  administration  collects  through  the  postal  transfer 
and  check  systems. 

The  fact  that  Heiligenstadt  began  by  proposing  a 
reserve  of  i  to  2  per  cent,  that  the  experts  before  the  bank 
inquiry  commission  afterward  thought  a  reserve  of  5 
per  cent  appropriate,  and  that  since  then  one  of  these 
experts  has  felt  prompted  to  raise  the  proportion  to 
10  per  cent,568  ought  to  suffice  to  demonstrate  the 
inept  and  dangerous  nature  of  all  these  proposals.  For 
why  stop  at  10  per  cent?  Someone  is  sure  to  turn  up, 
whether  inside  or  outside  the  Reichstag,  who,  with  "holy 


588 


The     German     Great    Banks 

zeal "  and  with  perfectly  incontestable  logic,  will  declare 
even  the  10  per  cent  insufficient,  for  it  is  obvious  that  50 
per  cent  at  the  Reichsbank  are  a  far  better  safeguard  than 
10  per  cent.  The  banks,  to  be  sure,  would  in  that  case 
fare  like  the  donkey  who  was  just  getting  accustomed  to 
live  without  food  when  he  died. 

My  attitude  toward  the  proposals  here  discussed,  as 
well  as  toward  any  reform  proposals  in  the  banking  busi- 
ness, is  based  on  the  fundamental  principle  that  all  those 
proposals  are  to  be  condemned  which,  without  being  of 
any  appreciable  benefit  to  the  community  as  a  whole,  are 
injurious  to  so  important  and  necessary  a  factor  in 
German  national  economy  as  the  banks.  In  the  same 
way  I  am  opposed  to  those  proposals  which  do  more  harm 
than  good  to  the  community  at  large,  or  which  are  obscure 
in  their  motives  and  aims,  and  of  whose  consequences  no 
estimate  can  be  formed.  On  the  other  hand,  I  should 
not  a  priori  be  opposed  to  measures  the  execution  of 
which  would  impose  certain  sacrifices  on  the  banks,  pro- 
vided such  proposals  promise  to  result  in  notable  benefit 
to  the  whole  community  and  thus  perhaps  in  indirect 
advantages  to  the  banks. 

6.  THE   PUBLICATION   OF   SUMMARY   BANK   STATEMENTS  (ROHBILANZEN) 
ACCORDING  TO  A  LEGALLY  PRESCRIBED  FORM. 

Such  a  benefit  to  the  general  public  and  to  the  banks 
is  put  forward  as  an  argument  for  the  publicity  proposals, 
especially  that  of  Count  Arnim-Muskau.569  Though  not 
worded  to  that  effect,  yet  the  meaning  of  this  proposal, 
in  view  of  the  nature  of  the  German  banking  business, 
amounts  to  this,  that  all  banks  and  merchants  who  as  a 
part  of  their  business  accept  deposits  to  amounts  exceed- 
ing on  an  annual  average  half  (?)  of  their  liable  capital 


589 


National    Monetary     Commission 

shall  be  under  legal  obligation  to  publish  summary  state- 
ments on  the  first  of  every  quarter.  These  statements, 
it  is  proposed,  are  to  conform  to  a  legal  schedule,  a  draft 
of  which  is  given,  and  are  to  be  published  at  the  latest  on 
the  first  of  the  following  month  in  newspapers  publish- 
ing official  communications. 

I  do  not  believe  that  such  statements  would  fulfill  the 
purpose  of  adequately  enlightening  the  general  public, 
and  especially  the  depositors,  as  to  the  condition  of  the 
bank  to  which  they  have  entrusted  or  intend  to  entrust 
their  deposits,  no  matter  what  schedule  may  be  adopted. 
If  the  schedule  goes  into  minute  details,  it  will  as  a  rule 
not  be  read  any  more  than  long  prospectuses.  If  it  does 
not  go  into  details,  but  merely  gives  " total  amounts"  for 
the  various  items,  as  is  natural,  and  as  is  in  fact  contem- 
plated in  the  Arnim  proposal,  it  will  be  read,  but  will 
seldom  fulfill  its  purpose  of  enlightenment,  since  it  will 
leave  the  reader  in  the  dark  on  those  very  points  that  are 
of  the  greatest  importance  as  regards  the  soundness  of  the 
banks. 

In  particular,  if  the  statement  draws  a  distinction  be- 
tween the  secured  and  unsecured  debit  accounts,  the 
essential  point  will  be  the  kind  of  security  given  in  the 
individual  case,  whether  a  mortgage  on  improved  rural  or 
urban  real  estate,  a  factory,  or  unimproved  ground,  and 
whether  the  mortgage  is  first  or  second,  whether  securi- 
ties have  been  deposited,  and  if  so,  what  is  their  qual- 
ity, whether  bond  has  been  given,  and  if  so,  what  is  the 
financial  standing  of  the  bondsmen,  etc.  On  all  these 
points  the  balance  sheet  will  fail  to  enlighten  the 
reader.  Neither  will  it  be  possible  to  gather  from  it  the 


590 


The     German     Great    Banks 

composition  of  the  various  items,  such  as  the  security  and 
syndicate  accounts.  In  particular,  it  will  be  impossible 
to  tell  whether  the  securities,  bills,  contango,  loans  on 
collateral,  debits  on  current  account  enumerated  in  the 
statement  are  good  or  bad;  and  yet  the  quality  of  the 
assets  is  the  main  point,  the  quantity  being  of  secondary 
importance.  Further,  acceptances  may  quite  properly 
have  been  substituted  for  book  credit,  and  vice  versa. 
Business  discretion,  which  is  an  imperative  necessity, 
will  of  itself  forbid  the  publication  of  details,  but  even  if 
such  publication  were  attempted  it  would  simply  cause 
the  statement  to  remain  unread.  This  is  precisely  what 
took  place  with  the  prospectuses,  the  publication  of  which 
was  vehemently  demanded  some  time  ago  in  the  interest 
of  public  enlightenment.  If  they  are  too  long  they  are 
never  read,  except  long  after  their  publication,  for  the 
purpose  of  constructing  a  claim  for  indemnity  when  the 
market  value  of  the  securities  has  greatly  declined. 

Further  "  total  amounts  "  fail  to  indicate  the  most  dan- 
gerous cases  of  credit  granting,  which  have  so  frequently 
caused  banks  to  fail570  in  England  as  well  as  in  Ger- 
many— I  need  only  refer  to  the  Leipziger  Bank — for 
instance,  the  case  in  which  a  bank  has  granted  excessive 
credit  to  one  and  the  same  person,  firm,  company,  or 
institution,  or  to  one  and  the  same  branch  of  industry. 
The  obligation  imposed  on  American  note  banks  never  to 
grant  individual  credit  beyond  a  certain  portion  (one- 
tenth)  of  their  share  capital,  does  not  take  sufficiently 
into  account  the  situation  and  status  of  each  bank.  It  is, 
therefore,  on  the  one  hand,  too  schematic,  while  on  the 
other  hand,  as  experience  has  shown,  it  can  easily  be 
evaded. 


591 


National    Monetary     Commission 

Experience  has  proved,  moreover,  that  the  most  dis- 
graceful failures,  such  as  those  which  took  place  in  Eng- 
land, particularly  in  time  of  crisis,  occurred  among  those 
very  deposit  banks  that  had  published  their  statements. 
The  collapse  frequently  occurred  immediately  after  such 
publication,  perfectly  legal  in  form,  without  anyone 
being  able  to  gather  from  these  documents  even  the 
slightest  hint  of  the  impending  crash. 

Space  does  not  permit  all  the  details  of  the  Arnim 
proposal  to  be  discussed  here.  I  should  only  like  to 
make  the  following  remarks  in  reference  to  the  oft- 
repeated  demand  for  a  statement  of  all  assessments  due 
on  account  of  participations.  Even  the  managers  of  a 
syndicate  are  often  unable  to  foretell  the  amount  of  these 
assessments  with  any  degree  of  certainty.  Such  is  the 
case  with  the  liquidation  of  long-term  engagements 
resulting  from  the  taking  over  of  railways  or  factories  or 
other  establishments,  with  the  rehabilitation  of  distressed 
or  wrecked  undertakings,  with  international  business 
whose  management  and  central  offices  are  located  abroad. 
Again,  there  are  cases  in  which  it  is  utterly  impossible  at 
the  time  of  publication  of  the  statements  to  foretell  the 
amount  to  be  ultimately  invested  in  an  enterprise  (per- 
haps h,  fonds  perdu)  or  the  date  of  maturity  and  the 
amount  of  subsequent  assessments,  or — a  case  of  par- 
ticularly frequent  occurrence — the  amount  of  the  repur- 
chases (Ruckkdufe)  which  have  to  be  undertaken  so  often 
and  to  such  extent  even  after  the  syndicate  business 
proper  is  ended.  Syndicate  assessments  are  like  house- 
hold budgets;  those  expenses  that  could  not  be  foreseen 
at  the  time  the  estimate  was  made  are  the  very  ones  that 


592 


The     German     Great    Banks 

crop  up  most  frequently  and  are  surest  to  disturb  the 
whole  forecast. 571 

Finally,  summary  statements  may  be  misleading,  be- 
cause frequently  losses  to  be  written  off  and  other 
deductions  (Rucklageri)  can  only  be  ascertained  in  the 
course  of  the  business  year  or  at  or  even  after  its  close, 
just  before  the  drawing  up  of  the  annual  balance  sheet; 
and  yet  the  necessity  and  amount  of  these  items  are  of 
essential  importance  in  gauging  the  bank's  position. 
Again,  in  a  summary  bank  statement  credit  and  debit 
items  appear  without  anything  to  show  whether  a  creditor 
is  at  the  same  time  a  debtor,  and  vice  versa,  and  whether 
compensations  must  accordingly  be  allowed  for  to  a  large 
extent.572 

But  while  I  do  not  believe  that  the  periodical  publica- 
tion of  summary  statements  can  contribute  much  toward 
the  enlightenment  of  the  public  regarding  the  true  condi- 
tion of  a  bank,  yet  I  will  not  dispute  the  beneficial  effect 
of  the  public  criticism  that  may  be  elicited  by  such  publi- 
cations. The  comparison  of  statements  of  different  banks, 
published  simultaneously,  would  afford  a  far  broader  and 
more  reliable  basis  for  such  criticism  than  can  be  expected 
of  a  single  statement. 

I  also  regard  these  publications  as  a  very  excellent 
means  of  self -education  for  the  banks.  Their  mutual 
criticism,  based  on  the  published  statements,  may  grad- 
ually lead  to  uniform  or  approximately  uniform  principles 
of  business  management,  especially  regarding  the  manner 
and  extent  of  credit  granting,  and  gradually  to  an  under- 
standing concerning  some  lines,  at  least,  of  business 
policy.  This  understanding  might  thereupon  develop  in 


593 


National     Monetary     Commission 

all  these  directions  into  firm  and  sound  traditions,  which 
hitherto  have  largely  been  lacking. 

For  theoretical  and  practical  reasons  I  should  also  con- 
sider it  a  very  desirable  and  beneficial  result  if  these 
periodical  statements  should  lead  to  uniformity  in  their 
compilation,  and  gradually  also  to  uniform  annual  bal- 
ance sheets.  This  would  facilitate  the  comparison  of  the 
balance  sheets  of  all  the  credit  banks,  a  matter  which  at 
present  is  attended  with  great  difficulties. 

Finally,  it  must  not  be  forgotten  that  every  new  device 
which  enables  us,  unswerved  by  the  current  of  phenomena, 
to  read,  as  it  were,  from  a  barometer,  the  present  and  the 
near  future  of  economic  conditions  must  naturally  restrict 
the  limits  of  error,  which  in  this  matter  are  necessarily  so 
wide.  Summary  statements  of  credit  banks, 573  published 
periodically,  would  serve  that  purpose,  just  as  does  the 
publication  of  the  condition  of  the  Reichsbank,  or  of  the 
fluctuations  of  the  Reichsbank  discount  (official)  rate  and 
of  private  discount  rates,  of  the  demand  for  labor  at  the 
German  labor  exchanges,  as  well  as  the  publication  regard- 
ing the  revenue  from  the  stamp  tax,  from  which  the  amount 
of  bills  in  circulation  at  any  moment  can  be  ascertained, 
and  of  the  receipts  from  railway  traffic,  from  which  the 
existing  condition  of  industry  can  best  be  gauged.  These 
publications  supplement  each  other. 

Despite  the  undeniable  and  considerable  advantages 
which  the  periodical  publication  of  summary  bank  state- 
ments thus  affords,  I  am  decidedly  opposed  to  the  legal 
enforcement  of  such  publication.  My  objections  are  based 
on  what  seem  to  me  the  following  cogent  reasons: 

In  the  first  place,  I  consider  it  an  ill-advised  step  on 
the  part  of  the  legislator  to  give  rise  to  the  belief  (which 


594 


The     German     Great    Banks 

would  naturally  gain  ground  among  wide  circles  of  the 
general  public)  that  from  a  publication  of  this  kind,  which 
has  never  yet  been  adopted  in  England,  depositors  could 
gain  a  clear  idea  as  to  the  status,  and  therefore  as  to 
the  soundness,  of  the  bank  to  whose  charge  they  have 
entrusted  or  intend  to  entrust  their  deposits.  This  belief 
would  be  an  erroneous  one,  no  matter  what  form  of  publi- 
cation might  be  adopted,  and  it  is  not  becoming  or 
incumbent  on  the  legislator  to  aid  in  propagating  such 
errors.  Cases  like  those  of  the  L-eipziger  Bank  and  the 
Marienburger  Privatbank  would  most  probably  have 
occurred  under  the  same  management,  even  if  those  banks 
had  published  summary  statements.  As  a  matter  of  fact, 
they  did  publish  most  handsome  annual  balance  sheets, 
which  were,  moreover,  accompanied  by  a  "business  report." 

My  second  reason,  which  to  my  mind  is  decisive,  is  that 
a  compulsory  legal  regulation  of  this  kind  can  not  be  con- 
ceived without  a  legal  schedule  for  drawing  up  the  state- 
ment. In  fact,  a  multitude  of  such  schedules  have 
already  been  suggested  by  competent  and  incompetent 
persons. 

Now,  a  legal  schedule,  unalterable  for  a  series  of  years, 
is  an  absurdity,  for  the  business  spheres  of  banks  are  con- 
stantly changing,  and  accordingly  the  schedule  would  of 
necessity  be  subject  to  constant  changes,  dictated  by 
practical  experience.  A  schedule  drawn  up  by  the  bank 
themselves  to-day  would  of  necessity  be  different  from 
one  drawn  up  ten  years  ago  and  from  one  that  might  be 
drawn  up  ten  years  hence. 

If  ever  the  impotence  of  legislation  in  any  field  was 
evident  a  priori,  it  is  in  this  field,  where  the  business  in 


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National     Monetary     Commission 

question  does  not  proceed  in  a  stereotyped  and  automatic 
manner,  as  is  in  the  main  the  case  with  note-issuing  banks, 
insurance  companies,  and  mortgage  banks.  The  latter 
are,  on  that  account,  much  more  susceptible  of  govern- 
ment regulation,  which  our  German  habit,  the  result  of 
centuries  of  drill,  still  prompts  us  to  regard  as  the  last 
resort  (ultimum  refugium)  in  all  cases  demanding  a  remedy. 
In  the  third  place,  practical  experience,  in  Germany 
especially,  has  abundantly  shown  that  legislative  ca- 
pacity and  skill  are  as  yet  imperfectly  developed  among 
us,  especially  in  economic  matters.  Such  matters  as  the 
publication  of  bank  statements  or  the  deposit  of  cash 
reserves  for  the  security  of  deposits,  which  to  the  layman 
seem  self-evident,  urgently  necessary,  and  simple  in 
execution — "simple  solutions  are  always  seductive  to 
simple  minds" — are  in  reality  exceedingly  difficult  and 
complicated.  Hence  it  is  to  be  feared  that  the  advocates 
of  these  proposals,  starting  from  the  most  diverse  premises 
and  pursuing  the  most  diverse  purposes,  would  carry 
them  into  execution  in  a  form  which  can  not  fail  to  lead 
to  the  gravest  embarrassments,  as  experience  has  repeat- 
edly proved..  Above  all,  there  is  imminent  danger — as 
illustrated  by  the  very  wording  of  the  Arnim  resolution — 
that,  aside  from  credit  banks,  not  only  savings  banks 
and  mutual  credit  societies  would  be  compelled  to  pub- 
lish statements,  but  also  private  bankers,  which,  to  my 
mind,  is  utterly  inadmissible,  for  deposits  are  entrusted 
to  a  private  banker  not  so  much  in  consideration  of  the 
amount  of  his  private  means,  but  in  consideration  of  his 
supposed  integrity.  To  compel  him  to  publish  a  state- 
ment of  his  financial  position  would  injure  and  paralyze 


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The     German     Great    Banks 

him  in  the  competition  within  the  private  banking  pro- 
fession. Legislators  should  under  all  circumstances  guard 
against  ill-advised  measures  likely  to  cause  injury  to 
and  to  hasten  the  suppression  of  the  small  bankers  and 
thus  repeat  the  mistakes  of  the  Bourse  law. 

Impressed  with  these  considerations,  I  heartily  wel- 
comed the  decision  of  the  Berlin  great  banks  to  publish 
voluntarily  (beginning  with  1909)  at  the  end  of  February, 
April,  June,  August,  and  October  (in  December  the  annual 
statement  is  issued)  summary  statements  according  to  a 
schedule  discussed  and  agreed  on  among  them  which 
essentially  corresponds  to  the  schedule  of  the  "  Deutsche 
Bank."  This  example  has  been  followed  to  a  great 
extent  by  the  joint-stock  banks,  and  will  doubtless  in 
time  become  the  universal  practice.  During  the  early 
deliberations  of  this  question  I  pointed  out  that  whatever 
schedule  was  chosen,  it  would  be  sure  to  be  criticized. 
However,  it  is  not  easy  to  conceive  a  schedule  which  would 
not  be  condemned  by  some  critics,  no  matter  whether  it 
was  drafted  by  the  banks  or  by  other  critics. 

7.  PENALTY  FOR  "BANKS  AND  BANKERS  WHO  BY  PUBLIC  OR  WRITTEN 
APPEALS  OR  THROUGH  AGENTS  SOLICIT  (anreizeri)  DEPOSITS  OR 
SAVINGS." 

On  the  occasion  of  the  passing  of  the  bank-act  amend- 
ment of  1909  the  Reichstag  petitioned  the  imperial 
chancellor  for  a  bill  to  ward  off  the  danger  caused  by  banks 
and  bankers  who  by  public  or  written  invitation  or 
through  agents  solicit  (anreizeri)  the  public  to  "invest 
with  them  their  deposits  or  savings." 

According  to  the  debate  in  committee,  the  bill  aims 
at  the  suppression  of  low-class  or  touting  bankers 


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National     Monetary     Commission 

(Winkel-oder  Animierbankiers) ,  or  of  business  men  who 
have  no  claim  to  the  name  "banker,"  but  who,  by  prom- 
ises of  specially  high  rates  of  interest  or  other  advantages, 
entice  the  public  to  hand  over  to  them  their  savings,  while 
the  persons  making  these  promises  are  neither  able,  nor 
in  many  cases  willing,  to  return  the  deposits.574 

Certainly  these  are  the  only  cases  in  which  there  exists 
any  danger  for  the  public,  and  some  of  these  cases  may 
at  once  be  eliminated  from  the  discussion.  If  a  written 
invitation  to  open  an  account  is  issued  by  a  business  man 
who  at  the  time  of  invitation  is  not  willing  to  return  the 
deposit,  nor  likely  to  be  able  to  do  so  at  that  or  some 
future  time,  it  should  be  considered  as  an  attempt  to 
defraud. 

Under  the  law  relating  to  unfair  competition,  the 
Central  Union  of  Bankers  and  Banks  at  Berlin  ("Central- 
"verband  des  Deutschen  Bank-  und  Bankiergewerbes  zu 
Berlin")  established  for  the  protection  of  banking  and 
bankers'  interests,  is  empowered  to  proceed  against 
persons  who  by  their  occupation  are  not  entitled  to  call 
themselves  "  bankers,"  with  a  view  to  enjoining  them 
from  making  public  use  of  that  designation.  I  am  in  a 
position  to  state  that  such  action  has  been  taken  on 
several  occasions.575  But  neither  these  sham  bankers 
(Nicht-Bankiers)  nor  savings  banks,  whose  resources,  as 
we  have  seen,  are  often  far  from  liquid,  are  aimed  at  in 
the  badly  worded  Reichstag  resolution,  which  only 
demands  that  steps  be  taken  against  banks  and  bankers. 
Besides  this  the  two  absolutely  different  terms  "deposits" 
and  "savings"  are  once  more  lumped  together. 
Furthermore,  the  resolution  recommends  that  legal  action 


598 


The     German     Great    Banks 


be  taken  even  when  the  invitation  to  invest  deposits.  (?) 
or  savings  (meaning,  probably  "  in  vestment  of  funds  in 
the  form  of  deposits  or  savings  ")  (zur  Anlage  von  Depos- 
iteri)  is  not  made  publicly,  provided  it  be  in  writing. 

But  such  a  written  invitation,  which  certainly  is  one 
form  of  "solicitation,"  may  under  certain  circumstances 
become  the  duty  of  a  bank  or  banker  in  a  case  where 
through  negligence  or  ignorance  a  customer  whose  busi- 
ness they  look  after  leaves  money  deposited  without 
interest. 

Moreover,  as  the  word  "solicit"  (anreizen)  used  in  the 
resolution  is  extremely  elastic,  having  received  the  most 
diverse  interpretation  both  in  theory  and  in  practice,  I 
do  not  believe  that  the  measure  proposed  in  the  Reichs- 
tag resolution  can  lead  to  any  practical  results.  It  is 
hard  to  say  which  is  the  graver  mistake,  to  enact  penal 
laws  whose  effect  far  exceeds  the  desired  and  economic- 
ally correct  purpose  or  such  as  are  rendered  nugatory  in 
practice. 

8.  A  SUPERVISORY  BOARD. 

I  am  equally  unable  to  approve  the  idea  of  a  govern- 
ment board  of  supervisors  recently  advocated  in  many 
quarters,  especially  by  Obst.  Such  an  institution  has 
never  yet  afforded  protection  against  fraudulent  manipu- 
lations, while  on  the  other  hand  it  is  very  apt  to  lull  the 
public  into  a  feeling  of  security  which  such  a  board,  from 
its  very  nature,  is  not  able  to  provide.  Even  though  pos- 
sessed of  the  most  thorough  expert  knowledge,  such  a  body 
would  not  be  in  position  to  obtain  a  sufficiently  correct 
estimate  of  the  quality  of  the  assets  of  a  bank,  to  say 
nothing  of  the  fact  that  no  bank  can  be  expected  to  allow 


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National    M on  et ar y     Commission 

its  competitor  who  might  be  called  upon  to  act  as 
expert  adviser  to  the  board  to  gain  an  insight  into  its 
business.576 

The  experience  of  all  countries  and  at  all  times  in  regard 
to  the  natural  inadequacy  of  state  supervision  (see  note 
23  on  p.  789,  also  pp.  54  and  601)  should  serve  as  a  warn- 
ing against  any  repetition  of  such  experiments. 

Herewith  ends  the  discussion  of  the  reform  proposals 
hitherto  made.  In  obedience  to  the  prevailing  tendency 
in  Germany  and  to  the  current  of  the  times,  nearly  all 
these  proposals  aim  at  some  intervention  by  the  State  or 
by  legislation,  which,  as  far  as  deposit  banks  are  con- 
cerned, has  always  been  most  decisively  condemned  in 
England,  the  very  country  which  is  assumed  to  be  the 
pattern  for  Germany  to  follow  in  this  matter.  Although 
I  am  by  no  means  an  adherent  of  the  defunct  Manchester 
theory,  I  must  confess  that  in  this  important,  compli- 
cated, and  difficult  question  I  share  the  opinion  expressed 
fifty  years  ago  by  a  prominent  authority  in  this  very  mat- 
ter, an  opinion  which  unfortunately  .  has  not  lost  its 
actuality  and  correctness:  "The  unfortunate  system  of 
tutelage  has  never  yet  stood  the  test  of  practice.  It 
merely  leads  from  step  to  step,  and  when  it  has  once  been 
adopted,  there  is  nothing  in  which  the  State  does  not 
think  itself  called  upon  to  interfere  in  the  interest  of  its 
citizens  and  for  which  the  latter  do  not  look  hopefully 
and  imploringly  to  the  State,  while  they  themselves  limit 
their  activity  to  complaints." 

The  man  who  wrote  these  words  in  1857  was  no  other 
than  Adolph  Wagner.577  I  frankly  admit  that  I  find  this 
confession  written  during  his  younger  years  more  con- 


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The     German     Great    Banks 

vincing  than  his  later  views  and  proposals,  which,  I  regret 
to  say,  are  quite  different. 

No  State  measures  will  avail  against  a  criminal  or 
negligent  treatment  of  deposits,  especially  no  legal  regu- 
lations nor  any  supervisory  board,  such  as  Wagner  pro- 
posed some  years  ago  while  under  the  immediate  impres- 
sion of  the  crisis  of  1901,  that  is  to  say,  at  a  time  least 
suitable  for  judicial  and  matured  proposals.578  I  feel 
convinced  that  the  German  banking  community  did  not 
in  any  way  deserve  such  a  manifest  vote  of  censure — for 
a  vote  of  censure  it  was ;  there  is  no  use  in  blinking  the 
fact.  The  one  thing  that  is  essential  above  all  in  this 
matter  is  the  honesty,  trustworthiness,  and  efficiency  of 
the  bank  managers.  In  the  United  States 579  the  Comp- 
troller of  the  Currency,  who  may  order  an  investigation 
of  the  national  banks  by  special  examiners,  declared  in 
his  official  report  for  1895  (p.  57  et  seq.)  that  as  a  rule 
the  examiners  detect  mistakes,  defects,  and  crimes  only 
after  the  failure  has  occurred,  and  that  no  supervision 
by  outsiders  can  serve  as  a  substitute  for  the  honesty 
and  competency  of  bank  managers.580 


601 


PART  IV.  THE  PROGRESS  OF  CONCENTRATION 
IN  GERMAN  BANKING  DURING  THE  SECOND 
PERIOD  (1870  TO  THE  PRESENT). 

CHAPTER  I.   CAUSES  OF  THE  CONCENTRATION 
MOVEMENT. 

I.   GENERAL   CAUSES.1 

As  was  shown  in  the  first  part  of  the  volume,  the 
German  banks  entered  upon  the  present  period  with 
very  limited  capital.  The  question  therefore  remains 
to  be  answered:  By  what  means  have  they  managed  to 
meet  the  ever-increasing  duties  imposed  upon  them  by 
the  tremendous  industrial  development  of  this  period? 
In  a  general  way  the  answer  is  as  follows:  The  same 
factors  which  we  have  shown  above  to  have  been  domi- 
nant in  the  general  economic  development  of  the  period 
appear  again  in  the  development  of  banking,  viz,  the 
expansion  and  concentration  of  capital,  resources,  and 
industrial  enterprise.  These  two  factors  appear  to  the 
superficial  observer  to  be  mutually  exclusive.  In  fact, 
however,  they  are  related  to  one  another  as  cause  and 
effect. 

Concentration,  a  child  of  the  capitalist  system,  is  pe- 
culiar neither  to  modern  development  nor  to  German 
conditions.  It  is  as  old  as  the  capitalist  system  itself 
and  equally  international.  It  appears  with  practically 
all  its  concomitants  in  the  activities  of  the  state  as  well 
as  in  private  industry. 


002 


The     German     Great    Banks 


As  proof  of  its  age  we  may  quote  one  of  many  exam- 
ples. As  early  as  ''the  last  quarter  of  the  fifteenth  and 
the  first  quarter  of  the  sixteenth  century  there  took 
place  a  concentration  of  capital  invested  in  mining  with 
a  rapidity  scarcely  equaled  in  our  time." 2  Certain  forms 
of  concentration  such  as  the  combination  in  one  enter- 
prise of  successive  stages  of  industrial  production  may  be 
traced  back  to  the  very  beginnings  of  large-scale  industry. 

Its  international  character  is  evident  from  its  appear- 
ance in  England  and  America,  in  France  and  Belgium 
in  the  same  or  even  in  a  more  pronounced  form  than  in 
Germany, 3  both  in  industry  and  in  banking. 

It  is  present  equally  in  public  and  in  private  industrial 
activities.  This  is  but  natural,  for  the  same  causes  are 
at  work  in  both  spheres  even  if  not  to  the  same  extent. 
Above  all  there  is  the  necessity  for  uniform  management 
of  all  industry  from  one  center.  Thus  the  postal  system 
was  united  practically  under  one  authority  after  all  the 
original  enterprises,  systems,  and  regalia  had  been  abol- 
ished. In  the  same  way  the  railroads  passed  out  of  the 
control  of  the  innumerable  private  companies,  to  be  op- 
erated, in  the  first  place  independently  by  the  various 
States.  Ultimately,  after  passing  through  intermediary 
stages,  they  may  be  operated  by  the  Imperial  Govern- 
ment or  form  part  of  an  imperial  railroad  union.  Even 
now,  there  are  some  unmistakable  signs  of  a  movement 
in  that  direction.  Thus,  for  example,  there  is  the  Prus- 
sian-Hessian Railroad  Union,  entered  into  by  two  States, 
and  the  agreements  regarding  the  joint  use  of  operating 
material  among  a  number  of  the  States  of  the  Imperial 
Federation. 


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National     Monetary     Commission 

A  similar  development  is  shown  in  the  absorption  of 
capital,  industrial  enterprise,  and  labor  forces  by  large 
cities;  in  the  ever-increasing  migration  of  rural  laborers 
to  the  cities  during  this  period;  in  the  great  increase  of  the 
urban  population,  particularly  in  the  industrial  cities;  in 
the  conflict  between  commerce  and  industry  on  a  large 
scale  and  the  retail  trade,  house  industry,  and  handi- 
craft, between  large  and  small  industrial  establishments; 
in  the  ascendancy  of  "mixed"  over  "pure"  establish- 
ments; of  commercial  distribution  on  a  large  scale,  in- 
cluding department  stores  over  the  small  retail  trade;  of 
the  large  landowner  over  the  small  peasant  proprietor,  the  • 
large  flour  mill  over  the  small  milling  establishments,  etc.4 

The  difference  in  this  period  has  been  only  in  the  in- 
tensity and  rapidity  with  which  the  tendencies  toward 
concentration  have  manifested  themselves.  This  has 
been  the  result  of  certain  factors  which  completely  revo- 
lutionized the  conditions  and  scale  of  production  and 
marketing,  to  wit:  The  extension  and  greater  reliability 
of  the  means  of  transportation  as  well  as  the  great  dis- 
coveries and  inventions  which  revolutionized  entire  in- 
dustries and  imposed  new  tasks  on  them  or  created  new 
industries. 

It  was  inevitable  that  the  movement  toward  expan- 
sion and  concentration  during  this  period  should  have 
proceeded  with  particular  rapidity  in  German  industry, 
which  at  that  time  was  developing  by  leaps  and  bounds. 
This  applies  also  to  the  German  banking  system,  united  for 
/  weal  and  woe  with  German  industry  by  a  thousand  and 
one  ties,  due  to  its  current-account,  check,  giro,  and 
credit  business,  and  to  the  banks'  activities  in  the  fields 


604 


The 

German 

G 

r  e  a  t 

Ban 

ks 

of  flotation  of  securities,  organization  of  firms  into  cor- 
porations, the  rehabilitation  of  companies,  consolidations, 
and  loans.5  The  main  reason  of  this  development  was 
that  the  German  banks,  with  scarcely  an  exception, 
appeared  on  the  scene  organized  as  stock  companies  or 
in  the  kindred  form  of  stock  companies  "  en  commandite." 
The  stock  company  is  the  keenest  and  surest,  and  hence 
the  favorite  weapon  which  the  capitalist  system  can 
use  in  its  struggle  for  concentration.  In  itself  the  stock 
company  represents  a  form  of  concentration,  viz,  the 
union  of  small  and  scattered  units  of  property,  in  most 
cases  too  small  to  be  fitted  for  productive  uses,  into  a  single 
mass  of  capital  suited  and  intended  for  industrial  or  pro- 
ductive purposes  under  single  management.  The  facility 
with  which  the  shares  can  be  marketed  or  transmitted  by 
inheritance,  the  probability  of  a  longer  term  of  existence  for 
the  corporation,  owing  to  the  far  greater  degree  to  which 
it  is  independent  of  the  personality  of  the  entrepreneur  as 
compared  with  other  forms  of  business  organization,  and 
finally  the  absence  (at  least  in  theory)  of  any  limitation 
on  the  amount  of  dividends  that  may  be  expected  on  the 
combined  capital — all  these  elements  give  the  corpora- 
tion great  power  to  attract  available  capital.  More  than 
any  other  form  of  business  organization,  the  stock  com- 
pany has  the  means  of  satisfying  its  needs  for  credit  and 
for  expansion  by  capital  increases.  The  ease  with  whic 
additional  capital  can  be  secured  naturally  stimulates  the 
tendency  toward  capital  increases.  This  tendency  grows 
in  constantly  increasing  ratio  by  reason  of  what  may  be 
regarded  as  an  economic  law  in  the  realm  of  industry, 
trade,  and  banking  alike,  according  to  which  a  twofold 


605 


dj 

"i 


National     M  o  n  et  ar  y     Commission 

increase  of  capital  means  more  than  a  twofold  increase 
of  production  and  sales.6  For  this  reason  the  tendency 
toward  capital  increases  is  enhanced  by  this  very  growth 
of  capital. 

2.    SPECIAL   CAUSES. 

As  stated  above  (p.  383)  the  period  under  consideration 
was  characterized  by  an  unforeseen,  suddenly  developing 
demand  for  capital  on  the  part  of  the  state  and  communes 
and  particularly  industry  and  trade.  This  demand  natur- 
ally made  itself  felt  in  the  two  important  fields  of  bank- 
ing activity,  viz.  that  of  national  and  international  clear- 
ings and  payments,  and  mainly  in  that  of  credit.  It 
became,  therefore,  an  imperative  necessity  for  the  banks 
to  strengthen  and  extend  the  exceptionally  weak  foun- 
dation of  capital  and  credit  with  which  they  had  entered 
upon  this  period. 

Accordingly,  the  available  funds  of  the  country  were 
forced  under  great  pressure  to  the  central  institutions  of 
credit — the  banks  which  served,  so  to  speak,  as  the  dis- 
tributing reservoirs  for  the  collection  of  the  resources  of 
capital  and  credit.  From  there,  as  from  a  higher  altitude, 
it  was  easiest  to  survey  the  extent  of  the  general  needs, 
to  calculate  the  proper  mode  of  distribution  of  the  avail- 
able resources  and  to  direct  them  more  readily  and 
quickly  into  the  various  channels  below.  In  other  words, 
the  concentration  of  banking  capital  brought  about  in  the 
first  place  through  an  increase  in  the  capital  stock  of  the 
banks  meant  the  progressive  accumulation  in  the  banks 
of  the  funds  needed  for  industrial  credit. 

In  this  field  concentration  became  especially  urgent,  on 
account  of  the  imperative  necessity  for  distributing  and 


606 


The     German     Great    Banks 

minimizing  risks7 — a  principle  which  can  be  applied 
most  thoroughly  where  business  is  conducted  on  a  large 
scale.  There  are  a  number  of  purely  technical  factors 
which  work  in  the  same  direction.  When  the  banks  are 
relieved  by  central  banks  of  issue  of  the  task  of  providing 
the  necessary  currency,  they  concentrate  their  activity 
in  the  field  of  credit.  The  latter  has  the  unmistakable 
tendency  to  increase  much  faster  than  the  cash  resources 
on  which  it  is  based.  Moreover,  the  difficulty  of  securing 
these  resources,  especially  by  way  of  capital  increases, 
grows  more  rapidly  than  the  demand  for  credit.  This 
is  because  the  ability  of  a  bank  to  increase  its  capital 
depends  not  only  on  the  dividends  which  it  has  been  pay- 
ing and  on  the  market  value  of  the  old  shares,  mainly 
though  not  exclusively  determined  by  these  dividends, 
but  also  on  the  condition  of  the  money  market.  The 
value  of  bank  stock,  like  that  of  industrial  securities, 
fluctuates  with  variations  in  industrial  prosperity  and 
the  prospect  of  dividends.  At  a  critical  moment  it  may 
easily  happen  that  no  market,  or  only  a  very  limited  mar- 
ket, can  be  found  for  new  issues  and  for  new  bank 
stock  in  particular,  as  the  market  may  be  paralyzed  by 
blundering  legislation  or  by  the  fact  that  new  issues  had 
been  made  in  excessive  amounts  or  in  too  rapid  succession. 
Furthermore,  there  are  special  technical  or  business 
limitations  on  a  bank's  ability  to  increase  its  capital. 
Hard  times  are  never  entirely  absent,  and  these  affect 
the  profits  from  the  flotation  of  securities  as  well  as  from 
the  regular  banking  business.  Under  such  conditions  it 
may  become  difficult  for  abnormally  large  stocks  of  capi- 
tal to  earn  adequate  dividends,  though  we  may  question 


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National     Monetary     Commission 

the  remark  made  to  the  writer  in  1 889  by  the  head  of  one 
of  the  largest  private  banking  firms,  that  in  the  long  run, 
with  their  larger  capital,  the  banks  could  not  earn  more 
than  the  current  rate  of  interest — a  pessimistic  view, 
which  has  since  been  proved  to  be  entirely  groundless. 

There  being  thus  limits — differing,  of  course,  with  par- 
ticular circumstances — beyond  which  the  banks'  own 
capital  can  not  be  increased,  it  becomes  evident  that  the 
banks  must  attract  outside  funds  for  use  in  their  expand- 
ing business.  The  accession  of  these  funds  enables  the 
banks  to  do  more  than  merely  increase  the  earnings  of  the 
business — i.  e.,  the  rate  and,  what  is  more,  the  steadiness  of 
dividends.  In  establishing  special  deposit  offices  for  the 
purpose  of  attracting  available  funds  the  banks  are  able  to 
increase  the  size  of  their  clientele,  particularly  among  the 
investing  class,  to  greatly  extend  their  capacity  to  float 
securities  on  their  own  or  outside  account,  and  to  place 
them  securely  and  permanently  among  customers  whose 
circumstances  and  reliability  are  accurately  known. 
Every  successful  flotation  of  securities  tends  in  turn  to 
increase  the  bank's  power  through  its  psychological  effect, 
which  in  this  matter  counts  for  a  good  deal.  Every  in- 
crease in  the  power  of  the  bank  tends  to  augment  largely 
the  tendency  toward  concentration.  It  also  serves  to 
enlarge  the  volume  of  the  bank's  business.  Furthermore, 
the  bank  gains  the  custom  of  the  provincial  bankers,  who 
form  such  an  important  part  of  the  clientele  of  the  Berlin 
banks.  These  as  well  as  other  customers  naturally  pre- 
fer to  deal  with  those  banks  from  which  they  are  likely  to 
derive,  in  addition  to  the  ordinary  benefits,  the  largest 
financial  advantages  in  connection  with  the  issue  of 


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The     German     Great    Banks 

securities,  either  by  being  allotted  subsidiary  participa- 
tions, by  being  designated  as  offices  for  the  receiving  of 
subscriptions  or  instalment  payments,  or  by  being  given 
special  bonuses. 

To  accomplish  successfully  the  flotation  of  securities 
presupposes  very  large  capital  resources  on  the  part  of  the 
bank  undertaking  the  operation,  for  it  must  be  in  a  posi- 
tion to  carry  for  a  long  time  unsold  securities  without 
detriment  to  its  other  business.  The  flotation  of  securi- 
ties promotes  concentration  in  another  direction.  Every 
issue  of  securities  naturally  seeks  a  center  where  a  strong 
stock  exchange  offers  the  best  prospects  for  the  ready  and 
permanent  sale  of  the  securities.  Accordingly,  from  the 
very  beginning  of  this  period,  Berlin  was  preferred  to  all 
other  places,  because  from  1870  to  the  time  when  it  was 
greatly  weakened  by  the  stock  exchange  act  (Jan.  i, 
1897),  the  Berlin  bourse  greatly  surpassed  all  other  Ger- 
man exchanges  in  strength — that  is,  in  its  ability  to  absorb 
securities  in  good  times  and  in  its  power  of  resistance  in 
bad  times,  and  was  able  to  exert  a  great  and  at  times  de- 
cisive influence  on  the  other  markets,  especially  those  of 
London  and  Paris. 

This  gave  to  the  Berlin  banks  another  advantage  over 
the  other  banks.  Besides,  they  were  first  to  attract  out- 
side funds,  particularly  in  form  of  deposits.  In  this  they 
were  successful  partly  for  general  reasons  and  partly  as  a 
result  of  the  system  of  deposit  offices  which  they  had 
inaugurated.  Thus  the  business  of  issuing  securities 
again  stimulated  concentration  of  capital  in  the  me- 
tropolis— that  is,  in  the  Berlin  banks. 

This  increased  power  to  float  securities  of  necessity 
proved  important  in  a  number  of  ways  in  the  international 

90311° — ii 40  609 


National    Monetary     Commission 

business  of  the  banks.  For  in  the  case  of  large  inter- 
national operations  in  the  issue  field  the  preference  is 
naturally  given  to  those  banks  which  by  previous  success 
in  that  field  have  proved  their  power  to  issue  and  dispose 
of  securities.  Whenever  the  German  market  is  resorted 
to  in  the  quest  for  a  larger  sale  of  securities — a  practice 
which  has  become  less  and  less  frequent  since  the  end  of 
the  nineties  owing  to  wrong  legislation,  which  impaired  the 
power  and  importance  of  our  exchange — the  bank  that 
will  naturally  be  favored  above  all  others  is  the  one  that 
shows  the  greatest  strength  both  by  reason  of  the  large 
number  of  its  customers  and  the  extent  of  its  business. 

The  same  or  similar  considerations  will  hold  in  other 
instances,  where  it  is  not  so  much  a  question  of  extending 
the  market  for  the  securities,  of  giving  them  a  wider  cur- 
rency, or  of  facilitating  arbitrage  transactions,  as  a  ques- 
tion of  the  successful  and  prompt  accomplishment  of  tasks 
dependent  on  international  cooperation,  such  as  the 
conversion  of  large  amounts  of  securities  which  have 
been  listed  and  placed  in  many  countries.  In  such  cases 
preference  will  again  be  shown  for  the  bank  which  has 
given  evidence  that  it  is  likely  to  prove  a  valuable  ally 
for  the  successful  liquidation  of  the  business  in  hand 
because  of  its  demonstrated  ability  to  float  successfully 
its  own  issues,  and  of  its  large  circle  of  cutomers,  extensive 
international  connections,  and  the  large  amount  of  coupon 
redemptions  on  account  of  the  loan  in  question. 

As  the  number  of  issues  and  the  amounts  involvec 
increase,  it  becomes  more  and  more  necessary  and  advan- 
tageous for  the  banks  to  follow  a  policy  of  expansion  anc 
simultaneous  concentration,  so  as  to  be  in  a  position  to 

610 


The     German     Great    Banks 


meet  all  the  demands  of  the  domestic  and  international 
security  market.  This  involves  the  flotation  and  sale  of 
securities  on  a  large  scale  and  can  be  done  successfully 
only  by  powerful  establishments,  whose  extensive  busi- 
ness operations  and  exact  knowledge  of  the  character  and 
financial  standing  of  their  large  clientele  enable  them  to 
dispose  of  securities  permanently  and  securely  by  placing 
them  "in  strong  hands."8  Such  banks  free  themselves 
and  their  domestic  or  foreign  associates  of  the  very 
unpleasant  necessity  of  having  to  intervene  and  to  take 
up  securities  thrown  back  on  the  market  immediately 
after  they  have  been  issued. 

Similar  phenomena  may  be  observed  where  the  banks 
have  built  up  an  extensive  bill  business.  The  bills  of 
customers  flow  most  abundantly  toward  those  banks 
which  have  learned  first  how  to  extend  their  industrial 
and  commercial  connections.  With  the  growth  of  these 
connections  there  goes  a  simultaneous  concentration  of 
capital  and  an  expansion  of  operations  which  in  turn  leads 
to  still  more  extended  business  connections,  also  to  con- 
stantly increasing  activity  in  the  international  money 
market,  and  thereby  to  business  in  foreign  bills  of 
exchange.  The  processes  here  involved  are  both  cause 
and  effect  of  progressive  concentration. 

The  same  is  true  of  the  acceptance  business  of  the  banks. 
The  extent  of  these  transactions,  as  we  have  seen,  has 
been  largely  increased  by  the  development  of  oversea  ' 
relations  (cf.  supra,  sec.  4,  I-III).  These  in  turn  lead 
to  the  establishment  of  branches  or  the  founding  of  special 
banks  abroad,  of  commandites,  or  other  connections  of 
various  kinds.  This  serves  largely  to  increase  the  tend- 
ency toward  concentration,  for  it  is  but  natural  that  in  a 


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National    Monetary     Commission 

foreign  market  particularly  the  acceptances  of  a  well- 
known  large  bank  with  extensive  capital  should  be 
taken  and  circulate  for  larger  amounts  and  on  more 
favorable  terms  than  the  acceptances  of  a  small  bank 
unknown  abroad. 

When  provincial  bankers  or  traders  want  bank  accept- 
ances their  preference  will  be  not  merely  for  those  banks 
which  can  offer  better  terms  or  other  conveniences,  and 
in  addition  further  favors  outside  of  acceptances,  but 
rather  for  those  banks  whose  acceptances  can  be  dis- 
counted with  the  least  difficulty  at  the  private  rate, 
regardless  of  the  number  of  bills  and  their  amount. 

The  development  of  clearing  and  giro  methods9 
likewise  makes  for  concentration  in  the  sense  that  this 
service  becomes  of  greater  value  in  proportion  as  the 
connections  of  the  bank  extend  and  the  number  of  cus- 
tomers benefited  by  that  service  increases.  The  latter 
moreover  presupposes  the  carrying  of  a  minimum  account, 
the  amount  of  which  has  been  considerably  increased 
during  recent  years.10  For  after  all  the  giro,  check,  and 
clearing  methods  constitute  merely  a  system  of  making 
payments  through  the  banks  which,  while  carried  on 
without  the  transfer  of  cash,  nevertheless  rests  on  the 
presence  of  a  cash  reserve.11 

Aside  from  the  special  economic  causes  enumerated, 
as  making  for  expansion  and  concentration  in  German 
banking,  we  must  refer  also  to  such  influences  which 
were  not  purely  economic  or  commercial  in  nature,  but 
were  due  to  other  external  motives  such  as  etiquette, 
competition,  and  so  forth. 


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The     German     Great    Banks 

Thus  quite  often  a  bank  would  feel  impelled  to  follow 
suit  after  another  bank  had  led,  as  for  example  in  estab- 
lishing a  branch  at  the  identical  place  where  it  had  been 
established  by  another  bank,  though  not  in  the  same 
order.12  In  determining  the  amount  by  which  the 
capital  should  be  increased  banks  would  be  guided  not 
merely  by  consideration  of  their  needs,  but  also  by  the 
determination  not  to  be  outdone  in  the  capital  increase 
by  a  competing  bank. 

CHAPTER  II. — CAUSES  DETERMINING  THE  EXTENT  AND 
RAPIDITY  OF  THE  CONCENTRATION  MOVEMENT. 

SECTION  I.  GENERAL  CAUSES. 

The  extent  to  which  concentration  may  go  in  banking 
is  a  priori  unlimited.  In  theory  at  least  there  are  no 
bounds  to  capital  in  this  field.  Here  concentration  meets 
with  less  resistance  and  fewer  technical  difficulties  and 
obstacles  of  the  kind  likely  to  be  met  with  in  industry,  for 
instance,  when  it  is  intended  to  enlarge  the  plant  or  estab- 
lishment. On  the  contrary,  banking  capital  not  only 
permits  but  even  incites  constant  and  continuous  expan- 
sion and  concentration.  This  inherent  tendency  of  bank- 
ing capital  grows  with  the  increase  of  the  country's  wealth, 
i.  e.,  with  the  growth  of  capital  available  for  productive 
use.  It  is  strengthened  in  proportion  as  this  productive 
capital  comes  to  be  distributed  among  increasingly  larger 
strata  of  the  population.  Nor  is  there  any  such  powerful 
counterweight  to  this  tendency  of  capital  as  there  is  in 
trade,  where  business  on  a  small  scale  still  predominates 
and  offers  very  serious  resistance  to  the  progress  of  large- 
scale  enterprise.  The  situation  is  also  different  from  that 


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National    M on  et ar y     Commission 

in  industry,  where,  at  least  at  times  and  in  some  branches, 
the  cartels  have  to  a  certain  extent  done  more  to  help  and 
maintain  than  to  hamper  the  existence  of  small  and  weaker 
establishments . 

SECTION    2.    SPKCIAIy   CAUSES. 

Both  the  intensity  and  the  rapidity  of  the  movement 
toward  concentration  are  greatly  enhanced  whenever 
special  causes,  operative  in  banking  to  a  greater  degree 
than  elsewhere,  remove  existing  obstacles  in  the  way  of 
the  movement,  or  introduce  new  factors  which  initiate 
this  development  with  great  suddenness,  or  cause  it  to 
develop  more  powerfully  and  rapidly  than  might  other- 
wise have  been  the  case.  In  such  instances  the  movement 
toward  concentration  precipitates  itself  headlong  like  a 
flood  and  proceeds  with  awful  violence,  as  if  all  contriv- 
ances for  stemming  the  tide  had  been  swept  away  and  all 
dams  had  been  destroyed  by  some  natural  catastrophe. 
In  both  directions  just  mentioned  there  have  been  at  work 
during  the  last  period  three  factors  of  particular  impor- 
tance. 

I.  The  liquidation  of  banks  (Entgrundung) ,  which  set 
in  after  the  panic  of  1873.     The  course  of  this  movement 
is  described  more  fully  below  (p.  636  and  following). 

II.  The  cartel  movement  in  industry,  which  had  begun 
as  early  as  the  seventies,  but  became  most  noticeable  in 
the   nineties.     In   this    connection    the  most  important 
events  were  the  formation  of  the  Rhenish-Westphalian 
Coal  Syndicate  in  1893  and  of  the  Rhenish-Westphalian 
Pig  Iron  Syndicate  in  i897.13 

The  psychologic  effects  of  the  formation  of  these  com- 
binations were  felt  all  over  Germany,  and  not  the  least 


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The     German     Great    Banks 

among  banking  circles,  which  naturally  were  first  to  appre- 
ciate the  commercial  advantages  of  the  new  development. 
In  the  first  place,  it  was  universally  assumed  that  the 
concerted  action  of  these  syndicates  would  soon  put  an 
end  to  reckless  cutting  of  prices  at  home  and  to  competi- 
tion abroad  and  usher  in  a  period  of  prosperity  in  the 
mining  and  smelting  industries  and  with  it  also  in  bank- 
ing. But  in  order  to  win  the  struggle  both  within  and 
without,  and  also  to  be  prepared  for  the  boom  period 
which  was  believed  to  be  imminent,  large  funds  were 
needed.  These  funds  had  to  be  provided  in  the  first  place 
by  the  banks,  which,  as  many  financial  reports  in  those 
days  kept  emphasizing,  were  in  duty  bound  to  stand  by 
industry  in  its  struggles.  On  the  other  hand,  the  banks 
might  naturally  expect  decided  business  advantages  from 
the  development  of  more  intimate  relations  with  indus- 
try, and  particularly  with  the  mining  and  smelting  in- 
dustries in  Rhenish- Westphalia  and  Upper  Silesia.  Furth- 
ermore, the  assumption  seemed  justified  that,  with  con- 
stantly increasing  operations,  the  mining  industry  would 
not  content  itself  with  the  capital  and  credit  which  the 
banks  heretofore  connected  with  the  industry  were  able 
to  supply,  although  some  of  these,  like  the  A.  Schaaff- 
hauseri'scher  Bankverein,  had  from  the  start  made  the 
mining  industry  their  special  field.  Intimate  relations 
with  the  mining  industry  and  particularly  with  the  newly 
created  coal  and  iron  syndicates  in  the  Rhenish- West- 
phalian  and  Upper  Silesian  districts  held  out  the  hope  of 
profitable  business  both  in  the  fields  of  current  account 
and  credit;  they  also  promised  a  large  influx  of  available 
funds,  and  in  addition  increased  power  and  influence  in 
various  directions. 


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National    Monetary     Commission 

It  was  these  reasons  primarily  which  prompted  the 
Deutsche  Bank  in  1897,  the  year  in  which  the  Rhenish- 
Westphalian  Pig  Iron  Syndicate  was  organized,  to  carry 
out  at  one  swoop  a  plan  which  had  probably  been  con- 
ceived as  early  as  1893,  the  year  of  the  formation  of  the 
Rhenish- Westphalian  Coal  Syndicate,  whereby  the  bank 
secured  a  firm  foothold  in  both  the  Rhenish  Westphalian 
and  Upper  Silesian  districts.  This  was  the  establishing  of 
communities  of  interest  on  the  one  hand  with  the  Bergisch- 
Markische  Bank  in  Blberfeld,  a  bank  with  an  old  and  well- 
established  standing  in  Rhenish  Westphalia,  having  nu- 
merous branches  and  old-time  connections  with  industry 
in  general  and  mining  in  particular,  and,  on  the  other 
hand,  with  the  SMesischer  Bankuerein,  which  had  like- 
wise developed  extensive  and  highly -profitable  industrial 
connections  in  Upper  Silesia.  In  this  manner  the  Deutsche 
Bank  achieved  the  purposes  which  had  prompted  it  to 
enter  upon  these  communities  of  interest  with  a  skill 
equalled  only  by  the  large  scale  of  the  operations  involved. 

Only  after  some  time  did  the  other  banks  follow  suit,  and 
then  with  more  or  less  energy  and  success.  Competition 
set  in  for  the  creation  in  one  way  or  another  of  close  indus- 
trial connections,  as  we  shall  have  occasion  to  point  out 
more  fully  in  a  subsequent  chapter. 

As  coming  under  the  head  of  the  cartel  movement,  we 
may  mention  here  the  fact,  already  pointed  out  in  another 
connection,  that  in  1897  the  A.  Schaaffhausen'scher  Bank- 
verein  organized  a  limited-liability  company  under  the 
firm  name  of  theSyndikatskontor  desA.  Schaaffhausen'schen 
Bankvereins  G.  m.  b.  H.,  which  was  to  serve  as  the  sales 
agency  and  clearing  office  primarily  for  the  Federation  of 


616 


The     German     Great    Banks 

German  Wire  Rope  Manufacturers  (Verband  Deutscher 
Drahtseilfabrikanten) ,  but  later  also  for  other  syndicates,  car- 
tels, and  combinations.  Moreover,  many  banks  which  had 
not  yet  secured  a  firm  position  in  this  respect  now  began 
gradually  to  obtain  representation  on  the  supervisory 
boards  of  those  mining  and  smelting  companies  which  had 
large  influence  in  the  management  of  the  important  syn- 
dicates. Gradually  the  Dresdner  Bank,  Deutsche  Bank, 
and  Darmstadter  Bank  obtained  representation  on  the 
board  of  the  Harpener  Bergbau-Aktiengesellschaft  and  be- 
came members  of  the  bank  group  identified  with  that 
company,  and  the  first  two  entered  the  board  of  the  Gel- 
senkirchener  Bergwerks-Aktiengesellschaft  and  joined  the 
group  of  banks  connected  with  the  latter  concern.  The 
Dresdner  Bank  joined  the  board  of  the  consolidated 
Konigs-  und  Laurahutte  and  the  group  of  banks  which 
stand  behind  that  concern.  The  Deutsche  Bank  attained 
the  same  position  with  regard  to  the  Konsolidation  Berg- 
werks-Aktiengesellschaft  at  Schalke,  the  Phoenix,  etc.  In- 
versely, representatives  of  large  industrial  interests,  espe- 
cially persons  of  great  influence  in  the  mining  industry, 
joined  in  increasing  numbers  the  supervisory  boards  of  the 
large  banks.  Thus  at  the  end  of  December,  1908,  repre- 
sentatives of  industrial  interests  appear  on  the  boards  of 
the  banks  in  the  following  numbers : 

Bank  fur  Handel  und  Industrie 4 

Berliner  Handelsgesellschaft 15  (14) 

Deutsche  Bank 4 

Disconto-Gesellschaft 4(15) 

Dresdner  Bank 1 1  (16) 

A.  Schaaffhausen'scher  Bankverein 19 

On   the  other   hand,   the   intimate   relations  with   the 
large  banks  and  their  extensive  resources  served  as  a  new 

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National    Monetary     Commission 

stimulus  for  various  industrial  establishments  to  extend 
their  operations  and  influence  in  their  respective  districts, 
to  establish  more  firmly  their  position  as  against  other 
establishments,  groups,  and  particularly  cartels,  as  well 
as  within  the  cartels,  by  way  of  combinations,  consolida- 
tions, and  fusions  of  all  sorts.  In  this  way  concentration 
in  banking,  which  had  been  greatly  influenced  both  in  the 
extent  and  rapidity  of  its  progress  by  developments  in 
industry,  and  particularly  by  the  formation  of  cartels,  in 
turn  helped  to  bring  about  concentration  in  industry. 

III.  Mistakes  of  legislation. — The  stamp  and  stock- 
exchange  laws. — The  rapidity  of  the  movement  toward 
concentration  was  heightened  by  the  heavy  burdens 
imposed  on  the  trading  in  securities  by  the  imperial 
stamp  acts  of  April  27,  1894,  and  June  14,  1900,  and  by 
the  stock-exchange  act  of  June  22,  1896,  which  entered 
into  force  on  January  i  of  the  eventful  year  1897. 

i.  As  early  as  1884,  when  it  was  proposed  to  impose  a 
percentage  tax  on  stock  transfers  (as  was  done  by  act 
of  May  24,  1885),  it  was  pointed  out  by  experts  that  the 
effect  would  be  "to  monopolize  the  banking  business  in 
the  hands  of  a  few  powerful  concerns."  17 

Nevertheless  the  policy  once  entered  upon  was  con- 
tinued. The  imperial  stamp  tax  of  April  27,  1894, 
doubled  the  existing  tax  on  transfers  (increasing  it  from 
one-tenth  to  two-tenths  per  mille)  and  prescribed  that 
the  tax  should  no  longer  be  levied  as  before  on  every 
full  thousand  marks,  but  also  on  any  additional  frac- 
tion of  a  thousand  marks.  It  left,  however,  transactions 
of  less  than  600  marks  exempt  as  heretofore. 


618 


The     German     Great    Banks 

The  act  of  June  14,  1900,  not  only  abolished  this  ex- 
emption,18 but  increased  substantially  all  the  rates  of 
the  stamp  tax  on  securities,  raised  the  stamp  tax  on  the 
final  certificate  of  transfer  (Originalschlussnote)  of  shares 
and  bonds  of  foreign  corporations  to  three-tenths  per 
mille,  and  introduced  a  tax  on  the  issue  and  transfer  of 
mining  stocks  (Kuxe). 

Under  the  act  of  October  i,  1885,  the  provincial  banker, 
who  had  forwarded  his  customer's  order  to  a  central 
banker  on  the  stock  exchange,  was  at  least  permitted 
under  certain  circumstances  to  hand  over  the  original 
transfer  certificate  to  his  customer  without  paying  a  new 
tax.  However,  the  provincial  banker  could  not  avail 
himself  of  this  relief  unless  he  was  willing  to  disclose  the 
name  of  the  central  banker  to  his  customer.  Accordingly 
until  a  more  practicable  method  was  introduced  by  the 
act  of  April  27,  1894,  the  provincial  banker  had  to  affix 
a  stamp  also  to  his  own  certificate  to  the  customer.  The 
result  was  an  increase  in  the  expense  of  the  business,  to 
which  there  had  to  be  added  the  commission  of  the  pro- 
vincial banker  and  the  commission  and  brokerage  fees 
of  the  central  banker,  which  at  the  time  were  more 
equitable  and  in  accord  with  the  trouble  and  the  general 
expense  involved  than  they  are  at  present.  The  direct 
result  was  that,  in  order  to  save  expense,  the  customers 
of  the  provincial  bankers,  in  spite  of  all  efforts  on  the 
latter 's  part,  began  to  deal  directly  with  the  central 
banker  or  with  the  branches  established  in  the  district 
by  the  great  banks.  This  trend  assumed  ever  larger  pro- 
portions when  the  banks  started  to  propose  to  their 
customers  to  participate  in  the  issue  of  securities  as  well 


619 


National     Monetary     Commission 

as  to  hold  out  to  them  more  favorable  terms  and  lower 
commissions  with  the  view  of  attracting  orders  in  the 
field  of  security  business. 

There  were  further  defects  in  the  stamp-tax  legislation 
which  contributed  to  bring  about  a  reduction  in  the  rates 
of  brokerage.  The  banks  to  an  increasing  extent  were 
able  to  offset  against  one  another  within  the  bank  the 
large  number  of  buying  and  selling  orders  that  came  pour- 
ing in  from  customers.  As  long  as  this  procedure  of 
offsetting  orders  continued  to  be  exempted  from  taxa- 
tion they  were  able  to  gain  at  least  the  equivalent  of  the 
entire  stamp  on  every  transaction  settled  within  the  bank. 
Owing  to  this  profit,  they  were  able  to  cut  lower  and  lower 
the  rate  of  commission  for  their  services  until  it  reached 
the  unprecedented  rate  of  one-half  per  mille,  a  rate  which 
nowhere  comes  near  a  reasonable  compensation  for  the 
trouble,  expense,  and  risk  involved,  and  which  probably 
is  not  found  in  any  foreign  country.  These  "compensa- 
tory transactions"  became  subject  to  taxation  only  three 
and  a  half  years  after  the  stock  exchange  act  went  into 
effect  under  section  12  of  the  imperial  stamp  tax  law  of 
June  14,  1900.  In  other  words,  they  remained  untaxed 
until  the  extensive  increases  in  bank  capital,  which  had 
been  made  as  a  result  of  the  stock  exchange  legislation, 
and  the  large  number  of  branches  and  deposit  offices 
which  had  meanwhile  been  established,  made  it  seem 
hopeless  for  the  smaller  provincial  bankers  ever  to  over- 
come the  lead  which  the  banks  in  the  meantime  had 
gained  on  them. 

Moreover,  the  increase  in  the  stamp  tax  rendered  it 
impossible  for  the  smaller  private  banker,  or  at  least  for 


620 


The     German     Great    Banks 

a  large  proportion  of  them,  to  engage  in  what  had  been  in 
former  years  important  and  lucrative  branches  of  business. 
Under  this  head  comes  speculation  in  daily  exchange 
quotations.  This  consists  in  taking  advantage  of  fluctu- 
ations in  the  daily  quotation  of  securities.  Its  effect  is 
to  bring  about  more  stable  and  uniform  quotations  by 
eliminating  small  variations  in  the  daily  quotations. 
This  function  of  the  banker  has  ample  business  justifica- 
tion and  renders  a  valuable  service  in  the  formation  of 
prices.  However,  as  the  margin  of  profit  is  small  it  can 
not  stand  a  tax  of  three-tenths  per  mille.19 

Under  the  same  head  comes  the  so-called  arbitrage 
business.  This  consists  in  taking  advantage  of  variations 
existing  on  different  exchanges  in  the  quotations  of 
domestic  securities  and  of  so-called  international  securi- 
ties dealt  in  also  on  foreign  exchanges.  This  activity 
serves  to  a  great  degree  to  equalize  and  establish  a  uni- 
form level  for  prices  of  securities  and,  moreover,  renders 
valuable  economic  service  in  facilitating  the  settling  of 
our  international  balance  of  trade  and  payments.20 

Furthermore,  a  part  of  what  had  been  the  business  of 
the  private  banker  was  now  taken  from  him  partly  as  a 
result  of  the  tax  burden  imposed  and  partly  in  conse- 
quence of  the  provisions  of  paragraph  8  of  the  bank- 
deposit  law  of  July  5,  i896,21  and  of  the  restrictive 
stock  exchange  legislation  to  be  discussed  below.  I  refer 
to  trading  in  foreign  securities.  This  part  of  the  business 
went  to  foreign  countries  and  came  to  be  attended  to  by 
foreign  bankers  in  place  of  our  own  bankers.  As  a  result 
of  all  this  the  brokerage  business  in  securities  left  to  the 
smaller  private  bankers  fell  off  from  year  to  year  and 


621 


National    Monetary     Commission 

became  progressively  less  profitable.  The  only  way  to 
increase  profits,  given  the  ruling  low  rates  of  commission, 
was  to  increase  the  scale  of  operations.  This,  however, 
was  out  of  the  question,  since  the  bulk  of  the  business 
now  went  more  and  more  to  the  banks,  and  primarily  to 
the  Berlin  banks  and  their  branches. 

2.  We  can  not  enter  here  upon  the  extent  of  the  injury 
inflicted  by  the  stock  exchange  legislation  on  the  German 
bourses,  and  indirectly  also  on  the  strength  and  com- 
petitive power  of  German  banking.  On  this  point  I  must 
refer  particularly  to  the  discussion  and  the  data  con- 
tained in  the  two  memorials  of  the  Centralverband  des 
Deutschen  Bank-und  Bankiergewerbes  (Central  Union  of 
German  Banks  and  Bankers)  of  June,  1901,  and  De- 
cember, I903.22  Here  only  a  particular  aspect  of  the 
question  can  be  dealt  with,  namely,  to  what  extent 
this  legislation  tended  to  hasten  the  movement  toward 
concentration. 

The  prohibition  of  "future"  dealings  in  securities, 
affecting  large  and  very  important  classes,  particularly 
mining  and  industrial  securities,  and  the  extensive  limi- 
tations on  "future"  dealings  in  other  securities,23  ac- 
complished but  little  more  than  the  bringing  to  the  fore 
of  cash  dealings  in  the  stock  exchange  business.  The 
result  was  that  since  1897  "a  larger  amount  of  cash  was 
made  necessary  for  the  same  amount  of  transactions  and 
that  the  total  requirements  of  currency  on  the  part  of 
the  German  business  community  was  increased  still  fur- 
ther just  at  a  time  when  the  volume  of  business  showed 
extraordinary  gains."24 


622 


The     German     Great    Banks 


The  smaller  private  bankers  were  naturally  in  no  posi- 
tion to  meet  with  their  own  funds  the  increased  require- 
ments of  ready  money  for  cash  transactions,  neither 
could  they  afford  to  tie  up  their  funds  in  this  way.  On 
the  other  hand,  as  soon  as  the  stock  exchange  legislation 
was  proposed  the  banks  foresaw  that  the  restrictions  of 
future  dealings  would  necessitate  the  use  of  larger  amounts 
of  cash.25  Accordingly,  when  the  law  went  into  effect, 
and  even  before,  they  largely  increased  their  capital  and 
available  funds  without  difficulty,26  and  as  a  result 
were  able  to  draw  to  themselves  even  more  effectively 
than  before  the  custom  of  the  private  bankers. 

Granted  even  that  the  tendency  toward  unification  and 
toward  operation  on  a  large  scale  is  common  to  all  branches 
of  industry,  and  that,  judging  by  the  experience  of  foreign 
countries  (except  the  United  States  for  the  time  being), 
sooner  or  later  the  position  of  the  private  bankers  as  a 
class  would  gradually  have  become  weakened  as  a  result 
of  the  general  concentration  tendencies 27  there  can  be  no 
doubt  that  the  provisions  of  the  stamp  tax  and  the  stock 
exchange  legislation  did  much  to  hasten  this  movement, 
or,  in  other  words,  to  accelerate  and  aggravate  the  decline 
of  the  economic  power  of  private  banking.28 

In  judging  of  this  development  the  main  question  is 
whether  there  has  been  an  essential  decline,  and  not 
whether  there  has  been  a  decrease  in  numbers.  It  is  only 
the  former  question  which  may  claim  economic  and  scien- 
tific interest.  There  may  be  a  decline  of  a  profession  in 
spite  of  an  increase  in  the  number  of  persons  or  establish- 
ments belonging  to  it.29  This  is  particularly  so  when  the 
increase  is  only  the  natural  and  proportionate  result  of  the 


623 


National    M  o  n  et  ar  y     Commission 

general  growth  of  population  or  when  the  gain  is  due  to 
numerous  accretions,  though  all  insignificant  in  point  of 
capital,  while  the  losses,  though  small  in  number,  involve 
a  large  exodus  of  capital. 

Again,  a  prof  ession  may  be  highly  flourishing  and  improv- 
ing in  position  and  influence,  even  when  the  number  of  indi- 
viduals or  establishments  is  declining.  This  has  happened 
frequently  abroad,  notably  in  England  and  France,  where 
the  number  of  banks  decreased  because  of  the  absorption 
of  a  large  number  of  small  concerns  by  large  establish- 
ments, which  have  thereby  increased  their  power.30 

It  is,  therefore,  unscientific  to  base  any  general  conclu- 
sions merely  on  an  observed  increase  or  decrease  of  abso- 
lute numbers  without  making  a  most  careful  analysis  of 
the  underlying  causes.  It  is  self-evident  that  we  do  not 
mean  to  deny  that  an  absolute  numerical  decrease  or  in- 
crease in  the.  number  of  establishments  or  persons  may  go 
hand  in  hand  with  the  decline  or  advance  of  the  particular 
class,  but  this  is  not  necessarily  so.  This  much  by  way 
of  preface.  We  may  now  take  up  Ernst  Loeb's  data.31 
According  to  the  table  prepared  by  him,  during  the  period 
1892-1902 — the  decade  including  the  great  boom  period 
of  1898-1900 — the  number  of  private  bankers  rose  from 
2,180  to  2,564.  In  all,  there  was  an  increase  of  380  for  the 
whole  of  Germany.  Even  if  there  were  no  doubts  of  the 
accuracy  of  the  statistics,  they  would  prove  very  little. 
An  increase  so  small  as  not  to  be  proportionate,  either  to 
the  growth  in  population  during  this  period  or  to  the  eco- 
nomic progress  of  the  decade  mentioned,  would  tend  to 
confirm  rather  than  to  refute  the  view  that  the  class,  as  a 


624 


The     German     Great    Banks 

whole,  had  been  on  the  decline,  even  though  there  might 
be  no  falling  off  in  absolute  numbers. 

As  a  matter  of  fact,  however,  the  table,  in  my  opinion, 
is  not  correct;  in  fact,  it  is  out  of  question  that  it  be  so. 
In  the  Deutsches  Bankierbuch,  on  the  basis  of  which  the 
table  is  prepared,  the  names  of  extinct  firms  or  of  firms 
which  have  gone  out  of  business  are  frequently  continued 
for  some  time.  This  is  easily  comprehensible.  More- 
over, as  Loeb  himself  admits  (op.  cit.,  p.  248),  a  large 
number  of  persons  who  appear  in  the  table  as  bankers 
are  either  brokers  or  curb  dealers  (Remisiers).  For  Ber- 
lin alone  this  is  true  of  at  least  93  names  as  early  as  1896, 
and  of  more  than  120  at  present.  In  Frankfort-on-the- 
Main  there  were  between  30  and  50  names  of  persons 
who  style  themselves  bankers,  but  who  are,  in  fact, 
merchandise  dealers  engaged  in  the  grocery  or  other 
trades,  who  do  banking  only  incidentally  and  as  occasion 
offers.  This  view  is  confirmed  by  the  investigations  made 
by  the  Central  Union  of  German  banks  and  bankers 
among  154  official  trade  bodies.32  The  returns  made  are 
surely  not  ' ( consciously  falsified  as  to  facts  and  figures 
in  order  to  mislead  public  opinion."33  The  answers  of 
115  of  the  trade  bodies  cover  both  the  newly  organized 
establishments  and  those  that  had  retired  from  business. 
The  answers  show  that  in  the  districts  of  these  115  cham- 
bers of  commerce  for  the  years  1891-1896,  or  before  the 
stock-exchange  law  was  enacted,  the  number  at  the  close 
of  the  period  as  compared  with  the  number  at  the  begin- 
ning was  65  more  for  banks  and  32  less  for  private  bankers. 
In  both  cases  branches  are  included.  For  the  years 


90311°— ii 41  625 


National    Monetary     Commission 

1897-1902,  however,  the  number  of  banks  and  their 
branches  at  the  end  of  the  period  was  207  greater  than 
at  the  beginning,  whereas  the  number  of  private  bankers, 
including  branches,  was  at  the  close  of  the  period  125 
less  than  at  the  opening.  There  seems  thus  to  have 
been,  also,  an  absolute  decline  in  numbers. 

As  has  been  explained  before,  without  a  detailed 
examination  of  the  phenomena  under  discussion,  no  con- 
clusive scientific  proof  can  be  attached  to  the  absolute 
figures.  Relative  numbers  are,  however,  much  more 
important  when  and  in  so  far  as  they  permit  of  definite 
conclusions.  In  this  respect  even  Loeb34  calls  atten- 
tion to  the  fact  that  for  the  ten-year  period  1892-1902,  in 
which,  as  he  thinks,  there  has  been  an  absolute  increase 
by  380  in  the  number  of  private  bankers,  the  growth  of 
the  banks,  both  in  number,  in  capital,  and  in  the  number 
of  branches  and  deposit  offices,  has  been  incomparably 
greater.  The  number  of  joint-stock  banks  grew  in  this 
period  from  379  to  616,  the  number  of  branches  (even  if 
we  disregard  the  branches  of  the  Berlin  banks)  from  73  to 
264,  while  even  in  the  briefer  period  from  1894  to  the  end 
of  1899  the  amount  of  their  capital  stock  had  grown  from 
449,000,000  to  871,000,000  marks.35 

The  decline  of  private  banking,36  in  part  absolute 
and  in  part  relative,  is  more  striking  in  comparison  with 
the  rapid  strides  toward  concentration  among  the  banks. 
It  is,  moreover,  marked  by  a  variety  of  other  phenomena. 
In  the  first  place  it  is  notable  that  in  Berlin,  the  seat  of 
the  greatest  stock  exchange,  there  was  a  great  decline  in 
the  absolute  number  of  private  bankers.  According  to 
Loeb37  the  decrease  was  from  538  in  1892  to  370  in 
1899.  In  the  other  larger  cities  the  number  appears 

626 


The     German     Great    Banks 

either  to  have  remained  stationary  or  to  have  increased 
somewhat. 

More  important,  as  showing  the  decline  of  the  private 
bankers  as  a  class,  is  the  relative  number  of  those  par- 
ticipating in  the  giro  business.  As  these  statistics  include 
only  the  better  class  of  private  bankers,  they  give  evidence 
not  only  of  the  numeric  but  also  of  the  more  serious  qual- 
itative decline  of  the  private  bankers  as  a  class. 

Number  participating  in  the  giro  business  within  the  German  Empire. 


At  the  end  of  — 

Banks 

and  their 
branches. 

Private 
bankers 
and  their 
branches. 

!876            

130 

974 

1896                                                                                                               .                                                           ... 

413 

I,  496 

These  figures  are  very  eloquent.  They  prove  an  enor- 
mous growth  of  giro  accounts  for  the  period  from  the 
beginning  of  1877  to  the  close  of  1890.  It  is  seen  that 
the  number  of  accounts  of  banks  and  their  branches  had 
increased  by  only  73,  while  those  of  private  bankers  and 
their  branches  had  grown  by  no  less  than  439.  On  the 
other  hand,  in  the  period  affected  first  by  the  stock 
exchange  legislation  and  later  by  the  imperial  stamp-tax 
legislation  of  June  14,  1900 — the  period  from  the  begin- 
ning of  1897  to  the  end  of  I9O238  the  giro  accounts  of 
the  banks  and  their  branches  had  increased  by  214  and 
those  of  private  bankers  and  their  branches  by  29  only.39 
L/ittle  as  this  increase  is,  nearly  all  of  it  is  to  be  ascribed 
primarily  to  banking  in  the  large  cities,  to  which  this  bus- 
iness has  drifted  along  with  business  in  general.  It  shows 


627 


National     Monetary     Commission 


a  tremendous  speed  of  the  movement  of  concentration, 
notably  in  these  six  years,  and  a  corresponding  decline 
during  the  same  period  in  the  position  of  private  bankers 
as  a  class. 

In  view  of  the  notorious  outcome  of  the  entire  develop- 
ment, it  may  be  doubted  whether  it  is  still  worth  while 
at  this  time  to  differentiate  and  contrast  the  rate  of 
growth  of  the  Berlin  banks  for  this  period  with  that  of 
the  provincial  banks.  The  clearly  established  fact  is 
that  the  same  concentration  which  went  on  among  the 
large  banks  took  place  also  among  the  provincial  banks, 
though  the  rapidity  of  this  movement  was  not  the  same 
for  the  provincial  banks  in  the  various  parts  of  the 
country. 

Thus,  for  example,  during  the  years  1893-1900,  inclu- 
sive— the  period  when  with  the  exception  of  the  Bergisch- 
Markische  Bank  (to  be  sure  the  most  important  of  these 
banks),  the  Rhenish -Westphalian  banks  had  not  yet 
become  "affiliated" — the  12  most  important  banks  of  the 
district  increased  their  capital  from  107,000,000  to  350,- 
000,000  marks,  or  about  226  per  cent.40  The  following 
statistics  compiled  from  the  returns  in  the  memorial 
of  the  Centralverband,  under  date  of  December,  1903, 
show  that  as  contrasted  with  the  average  for  the  period 
1883-1890  the  average  capital  and  surplus  funds  (werbende 
Kapitalien)  had  increased  as  follows: 


Between  t 

he  years  — 

1891-1896. 

1897-1902. 

22  institutions  at  that  time  independent  of  the  Berlin  great 

Per  cent. 
14   9 

Per  cent. 

10  Berlin  great  banks  

43-  7 

153-  2  « 

628 


The     German     Great    Banks 


After  a  large  part  of  the  provincial  banks  had  become 
"affiliated"  with  the  several  Berlin  great  banks,  there  can 
be  no  question  but  that  their  striking  growth  in  capital, 
number  of  branches,  etc.,  was  naturally  affected  in  a  large 
degree  by  their  connection  with  the  great  banks.  On  the 
other  hand,  since  1905  and  as  a  result  of  the  very  rapid 
growth  of  the  great  banks  and  their  chains  of  banks  out- 
side of  Berlin,  the  provincial  banks  which  had  not  become 
affiliated  with  the  great  banks  sought  to  extend  their 
sphere  of  operations,  with  a  view  to  maintaining  their 
independence  and  field  of  action.  This  was  particularly 
the  case  during  1906  and  1907,  when  the  process  of  con- 
centration among  the  great  banks  had  become  arrested. 

I  shall  call  attention  here  only  to  a  few  striking 
examples.  Thus  in  central  Germany  the  Magdeburger 
Bankverein,  founded  in  1867  as  a  stock  company  en  com- 
mandite  under  the  firm  name  of  Klincksiek,  Schwanert  & 
Co.,  incorporated  under  the  above  name  in  1897  with  a 
capital  of  1 5 ,000,000  marks,  had  on  December  30, 1 908 ,  seven 
branches  (in  Aschersleben,  Burg  near  Magdeburg,  Dessau, 
Hildesheim,  Nordhausen,  Peine,  and  Stendal).  In  1909  a 
branch  at  Braunschweig  was  added.  It  also  has  a  deposit 
office  (in  Greussen)  and  a  commandite  (G.  Vogler  in  Qued- 
linburg).  It  has  absorbed  the  following  banking  firms: 
1905,  S.  Frenkel,  Nordhausen;  1905-6,  Herzfeld  &  Buchler, 
Aschersleben;  1906,  H.  Bach,  Nordhausen;  1907,  Gebriider 
Dux,  Hildesheim;  1907,  Friedrich  Franz  Wandel,  Dessau; 
1908,  I.  Wertheimer,  Peine  (1909,  Otto  Weibezahl, 
Braunschweig) . 

Since  1907  it  has  been  intimately  connected  with  the 
Disconto-Gesellschaft.  A  director  of  this  bank  is  a  mem- 
ber of  the  supervisory  board  of  the  Bankverein. 

629 

' 


National    Monetary     Commission 

Thus  between  1905  and  the  close  of  1909  alone  the 
Magdeburger  Bankverein  absorbed  seven  banking  firms 
for  the  purpose  of  establishing  branches. 

The  Magdeburger  Privatbank  of  Magdeburg  and  Ham- 
burg (founded  1856,  capital  stock  36,000,000  marks,  sur- 
plus about  4,000,000  marks)  has — 

Thirteen  branches  (Dessau,  Eisenach,  Bisleben,  Erfurt, 
Halberstadt,  Halle-on-the-Saale,  Langensalza,  Miilhausen 
in  Thuringia,  Nordhausen,  Sangerhausen,  Torgau,  Weimar, 
Wernigerode  a.  H.). 

Twenty-eight  deposit  offices  (Aken  a.  E.,  Bismark  in 
the  Altmark,  Burg  near  Magdeburg,  Calbe  a.  S.,  Egeln, 
Eilenburg,  Finsterwalde  N.-L.,  Frankenhausen,  Garde- 
legen,  Genthin,  Helmstedt,  Hettstedt,  Merseburg,  Neu- 
haldensleben,  Oschersleben,  Osterburg,  Osterwieck,  Perle- 
berg,  Quedlinburg,  Schonebeck  a.  E.,  Sondershausen, 
Stendal,  Tangerhutte,  Tangermiinde,  Thale  i.  H.,  Witten- 
berg (district  of  Halle) ,  Wittenberge  (district  of  Potsdam) , 
Wolmirstedt) . 

One  commandite  (Ascherslebener  Bank,  Gerson  Kohen 
&  Co.,  Kommanditgesellschaft  in  Aschersleben) . 

The  Magdeburger  Privatbank  has  absorbed  the  following 
banks  and  banking  firms: 

1905.  Nordhauser  Bank,  Nordhausen;  Wilhelm  Hauffe, 
Eilenburg;  Julius  Elkan,  Weimar;  Tobias  Fricke,  Garde- 
legen. 

1906.  F.  W.  Quensel,  Sangerhausen;  Diskonto-Gesell- 
schaft,  Hettstedt. 

1907.  F.  Unger,  Erfurt;  Wittenberger  Spar-  &  lyeihbank, 
Registered  Mutual  Society  (Limited),  Wittenberg;  Paul 
Thiele,  Merseburg;  Eislebener  Bankverein,  Ulrich,  Zickert 


630 


The     German     Great    Banks 

&  Co.,  Eisleben;  Kreditbank  Eisenach  (Incorporated), 
Eisenach  (capital,  1,500,000  marks);  Vereinsbank  Miil- 
hausen  (Thuringia)  with  a  branch  in  Langensalza  (capital 
2,100,000  marks);  Torgauer  Bank,  Torgau  (capital, 
1,000,000  marks) ;  Sangerhauser  Bankverein,  Sangerhausen 
(capital,  898,000  marks) ;  Wernigeroder  Kommanditgesell- 
schaft  auf  Aktien  (stock  company  en  commandite)  Fr. 
Krumbhaar,  Wernigerode,  with  a  branch  in  Osterwieck 
i.  H.  (capital,  i,  500,000  marks) ;  Wechslerbank,  Hamburg 
(founded  1872;  capital,  7,500,000  marks). 

1908.  Erfurter  Bank  Pinckert,  Blanchart  &  Co.,  Erfurt 
(capital  3,008,100  marks);    A.  Sonnenthal,  Dessau;  Vor- 
schuss-  &  Sparverein,  Weimar,  Registered  Mutual  Society 
(Limited) ,  continued  under  the  name  Thuringische  Landes- 
bank,  A.  G.  Weimar,  which  in  1908  absorbed  theGewerbe- 
und  Landwirtschaftsbank  G.  -m.  b.  H.  Jena. 

1909.  Dresdner  Bankverein,  Dresden  (founded  in  1887; 
capital  21,000,000  mark).     This  bank  had  absorbed  the 
following:    1887,  Weimarische  Filialbank,  Dresden;  1890, 
the  branches  of  the  Geraer  Bank  in  Dresden,  Chemnitz, 
and  Leipzig;    1900,  Hch.  Wm.  Bassenge  &  Co.,  Dresden, 
continued  under  the  old  firm  name.     This  firm  in  turn 
has  branches  in  Meissen  (1904)   and  a  deposit  office  in 
Lommatzsch;      1907,    Ernest    Petasch,    Chemnitz,    and 
Krober  &  Co.,  Meissen. 

In  addition  to  the  branches  growing  out  of  these  banks 
and  firms  which  had  been  taken  over,  the  Dresdner  Bank- 
verein has  branches  in  Wurzen,  Kamenz,  and  Sebnitz, 
and  a  deposit  office  in  Oederan. 

After  the  consolidation  (effective  January  i,  1909) 
the  Magdeburger  Privatbank  adopted  the  firm  name  of 


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National    Monetary     Commission 

Mitteldeutsche  Privat-Bank  A  ktiengesellschaft  and  increased 
its  capital  stock  to  50,000,000  marks. 

Thus  since  1905  the  Magdeburger  Privat-Bank  (now 
Mitteldeutsche  Privatbank),  for  the  purpose  of  establish- 
ing branches  and  deposit  offices,  absorbed  8  private  bank- 
ing firms  and  1 2  banks. 

In  southern  Germany  the  following  banks  have  been  in 
the  forefront  of  the  concentration  movement. 

The  Bayerische  Vereinsbank  in  Munich  (capital  45 ,000,000 
marks).  It  has  12  branches — Augsburg,  Bad  Kissingen, 
Bayreuth,  Erlangen,  Kempten,  Kitzingen,  I^andshut, 
Nuremberg,  Passau,  Regensburg,  Straubing,  and  Wiirz- 
burg.  It  also  has  2  deposit  offices  in  Munich.  It  has 
absorbed  the  following  banks  and  banking  firms:  1885-86, 
Joseph  von  Hirsch,  Munich;  1891-92,  Guggenheimer  & 
Co.,  Munich;  1898-99,  Adolph  Bohm,  I^andshut;  1905, 
Stiglmeier  &  Bohm,  Straubing;  Gregor  Oehninger  Sohn 
&  Co.,  Wiirzburg;  1906-7,  Franz  Eglauer,  Passau; 
1907-8,  Niirnberger  Bank  in  Nuremberg,  Lauf,  Erlangen, 
Schwabach,  and  Hersbruck;  Wurzburger  Volksbank, 
Wiirzburg;  Friedrich  Feustel,  in  Bayreuth  and  Kissingen; 
Leyherr  &  Co.,  Augsburg;  F.  S.  Euringer,  Augsburg; 
August  L,eipert,  Kempten. 

Thus  since  1885  the  Bayerische  Vereinsbank  absorbed 
10  banking  firms  and  2  banks. 

The  Bayerische  Handelsbank  in  Munich  increased  its 
capital  in  1906  from  27,171,800  marks  to  33,963,800,  and 
in  1908  to  35,600,000  marks.  Between  1906  and  1908  it 
established  branches  in  Ansbach,  Immenstadt,  Bayreuth, 
Hof,  Gunzenhausen,  Lichtenfels,  Munchberg,  Nordlingen, 
Neuberg  on  the  Danube,  Markt-Redwitz,  Mindelheim, 


632 


The     German     Great    Banks 

Regensburg,  Rosenheim,  Schweinfurt,  and  Wiirzburg. 
Earlier  it  had  established  a  branch  at  Kempten  (in  1 899) , 
and  branches  at  Bamberg,  Kronach,  Kulmbach,  Mem- 
mingen,  and  Aschaffenburg  in  1905.  For  the  purpose  of 
establishing  or  enlarging  branches  it  took  over  the  follow- 
ing banking  establishments: 

1899.  Ignaz  Wolfsheimer,  Kempten. 

1905.  Hermann  Hellmann,  Bamberg  and  Kronach; 
F.  L.  Bauer,  Kulmbach;  L.  Ullmann  &  Sohne,  Kempten; 
Gewerbebank  Memmingen.  G.  m.  b.  H.  (Limited),  Mem- 
mingen;  Heinrich  Mayer,  Memmingen;  Wolf  S.  Gutmann, 
Ansbach;  M.  Wolfsthal,  Aschaffenburg. 

1906-7.  A.  Krauss,  Bayreuth  and  Munchberg;  Schul- 
ler  &  Co.,  Bayreuth  and  Hof. 

1907.  Hans  Mayer,  Lichtenfels;    Ludwig  Rosenf elder, 
Nordlingen;  Fr.  H.  Miller,  Mindelheim;  Max  de  Crignis, 
Neuberg  on-the-Danube. 

1907-8.  Wilhelm  Frank,  Gunzenhausen. 

1908.  Haymann  &  Co.,   Regensburg;   Richard   Kirch- 
ner,   Wiirzburg;   Kreditbank   Rosenheim  A.   G.    (capital 
1,000,000  marks) ;  I.  Gutmann,  Ansbach. 

Thus  the  Bayerische  Vereinsbank  absorbed  since  1899 
17  banking  firms  and  2  banks. 

In  western  Germany  among  others  the  Barmer  Bank- 
verein  of  Barmen  absorbed  the  Banner  Privatbank ,  the 
Westfdlische  Bankkommandite  Ohm,  Hermekamp  &  Co. 
(now  the  Niederdeutsche  Bank),  and  the  Godesberger 
Bank. 

The  Rheinisch-Westfalische  Disconto-Gesellschaft  in  Aix- 
la-Chapelle  (capital  80,000,000  marks),  which  we  omitted 
from  the  chain  of  banks  belonging  to  the  Disconto- 


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National    Monetary     Commission 

Gesellschaft  for  the  reasons  given  on  p.  673  (regarding  it 
as  an  independent  provincial  bank)  has  now  17  branches 
at  the  following  places:  Bielefeld,  Bochum,  Bonn,  Cob- 
lenz,  Cologne,  Dortmund,  Diisseldorf,  Godesberg,  Giiters- 
loh,  L4ppstadt,  Maria-Gladbach,  Neuss,  Neuwied,  Reck- 
linghausen,  Remscheid,  Traben-Trarbach,  and  Viersen.  It 
has,  besides,  7  deposit  offices — 3  in  Cologne  and  i  in  each  of 
the  towns  of  Kalk,  Kreuznach,  Malmedy,  and  Ratingen, 
and  2  commandites ,  Delbriick,  I/eo  &  Co.,  Berlin,  and  M.  W. 
Koch  &  Co.,  Frankfort-on-the-Main.  It  has  absorbed 
the  following  banks  and  firms: 


Establishments. 


Year. 


Capital. 


Bank  fur  Rheinland  and  Westfalen 

Koblenzer  Bank x 

Groethuysen  &  Linxweiler,  Viersen 

Kolnische  Wechsler-und  Kommissionsbank 

Neuwieder  Bankverein 

Bochumer  Bank,  Bochum   (with  branches  in  Dortmund  and 

Recklinghausen) 

Westfalische  Bank,  Bielefeld,  Lippstadt,  and  Gutersloh 

Otto  Lohmann,  Bielefeld 

Diisseldorfer  Bank,  Diisseldorf 

Johann  Ohligschlaeger  (Limited),  Aix-la-Chapelle 

Zulpicher  Volksbank,  Ziilpich 

Remscheider  Kredit-und  Sparbank 

Unnaer  Bank  in  Unna 

Cref elder  Bank  in  Crefeld  (continued  as  a  branch) 

Volksbank,  Erkelenz 

Hardy  &  Co.  (Limited),  Berlin 


1901 
1901 
1902 


Marks. 
8,334,000 
2, ooo, ooo 


1905 


1906 
1907 
1908 

1909 


12, 000, 000 
I, 000, 000 


5, ooo, ooo 

IO, OOO, OOO 


5, ooo, ooo 
5, 500, ooo 


750,000 

3 , ooo, ooo 


The  Rheinisch- Westfalische  Disconto-Gesellschaft  has 
formed  communities  of  interest  with  the  following  banks: 

Capital  (marks). 

Eschweiler  Bank °  i ,  ooo,  ooo 

Durener  Bank 8,  500,  ooo 

This  bank  absorbed  in  1905  the  Euskirchner  Volksbank 
and  the  Julische  Volksbank  and  established  branches  at 
Euskirchen  and  Jiilich. 

a  600,000  marks  paid  in. 


634 


The     German     Great    Banks 

Volksbank  Geilenkirchen-Hunshoven 315,  ooo 

Oberbergische-Bank,  Ohl 42 i,  505,  ooo 

Eupener  Kreditbank 500,  ooo 

Herf order  Discontobank 2,  500,  800 

Bunder  Bank. 

SECTION  4.    SPECIAL  CAUSES  OF  THE  RAPIDITY  OF  THE  CON- 
CENTRATION  MOVEMENT   DURING    1901-1904. 

TJie  concentration  movement  proceeded  with  an  un- 
usual degree  of  rapidity  in  the  years  following  1870  and 
again  during  the  years  1901-1904,  inclusive.  The  earlier 
period,  characterized  by  the  establishment  of  so-called 
provincial  banks,43  is  at  present  of  no  more  than  his- 
toric significance.  It  was  during  the  latter  period  partic- 
ularly that  concentration  assumed  striking  and  at  times 
even  uncanny  dimensions.  While  even  before  this  the 
movement  had  advanced  quite  rapidly,  these  four  years 
witness  a  record  speed  in  this  development. 

The  progress  in  concentration  was  greatly  accelerated 
by  the  influence  of  psychologic  factors,  as  is  so  often  the 
case  in  this  sphere  of  business. 

I.    THE   CRISES    OF    1873    AND    IQOO. 

The  general  observation  may  be  made  that  every  crisis 
is  followed  by  a  marked  strengthening  of  existing  tenden- 
cies toward  concentration  and  by  an  increased  rapidity  of 
the  movement  in  that  direction. 

After  every  crisis,  which  results  in  the  annihilation  and 
sweeping  away  of  many  undertakings,  the  weaker  estab- 
lishments which  were  able  to  survive  in  halfway  sound 
condition  only  through  assistance  of  some  sort  realize 
that  they  can  achieve  permanent  safety  only  by  merging 
with  other  establishments.  This  is  particularly  true  of 


635 


National    Monetary     Commission 

those  establishments  which  have  broadened  their  base  of 
operation  during  the  prosperous  years  before  the  panic 
by  enlarging  their  business  or  increasing  their  capital  to  a 
point  where  they  cannot  make  full  and  rational  use  of 
their  plant  or  capital  while  business  is  at  a  standstill. 

Wallich 44  properly  points  out,  therefore,  that  the  move- 
ment of  concentration  which  set  in  in  German  banking 
during  the  boom  period  1870-1872  proceeded  at  a  more 
rapid  pace  immediately  after  the  crisis  of  1873,  as  a  result 
of  the  liquidation  or  "disestablishment"  of  banks,  which 
was  carried  out  by  stronger  banks.  While  the  latter  fre- 
quently saved  from  total  collapse  weaker  banks  that  had 
fallen  into  sore  straits,  and  at  any  rate  made  it  easier  for 
them  to  realize  their  assets,  they  made  sure  at  the  same 
time  of  taking  over  valuable  existing  business  connections, 
fiscal  agencies,  etc.,  and  thus  largely  increased  their  power 
and  influence. 

It  was  in  this  manner  and  with  this  purpose  in  view 
that  the  Deutsche  Unionbank  during  the  period  1871-1874 
undertook  the  liquidation  of  four  banks,  the  Deutsche 
Bank  during  the  period  1873-1876 — the  liquidation  of 
the  Allgemeine  Depositenbank,  and  of  the  Elberf elder 
Disconto-  und  Wechselbank,  also  of  the  just-mentioned 
Unionbank,  which  paid  the  extreme  penalty  for  tying 
up  its  resources  in  the  above  operations.  The  Dresdner 
Bank  during  the  years  1873-1878  undertook  the  liquida- 
tion of  four  banks,  viz,  the  Dresdner  Handelsbank,  Sack- 
sischer  Bankverein,  Sachsische  Kreditgesellschaft,  and  Thur- 
ingische  Bank  in  Sondershausen.  Lastly,  in  1875,  the 
Wurttembergische  Vereinsbank  undertook  the  liquidation 
of  the  Stuttgarter  Bank. 


636 


The     German     Great    Banks 

Soon  after  this  (from  1876  and  on  into  the  eighties)  the 
Deutsche  Bank  carried  on  the  liquidation  of  four  other 
banks — the  Berliner  Bankverein,  the  Berliner  Wechsler- 
bank,  the  Frankfurter  Bankverein  (which  resulted  in  the 
establishment  of  a  branch  in  Frankf ort-on-the-Main) ,  and 
the  Niederlausitzer  Bank  in  Kottbus.  In  1876  the  state- 
ment of  the  Deutsche  Bank  contained  an  item  of  6,500,000 
marks  of  "securities"  chiefly  of  banks  in  liquidation, 
which  it  had  bought  up  cheaply.  During  the  same  period 
the  number  of  its  accounts  on  which  it  had  to  pay  com- 
missions had  increased  from  855  to  1,354. 

The  establishments  that  had  weathered  the  crisis  with 
their  own  resources,  without  being  obliged  to  resort  to  out- 
side help,  were  mainly  those  that  had  been  able  to  strengthen 
their  resources  greatly  before  the  crisis  through  the  con- 
centration and  consolidation  of  their  business  and  capital. 
Outsiders  usually  learn  of  this  for  the  first  time  during  the 
panic,  and  those  establishments  which  have  failed  to  do 
so  in  time  now  hasten  to  follow  the  example  set  by  the 
successful  establishments.  On  the  other  hand,  those  banks 
which  have  been  able  not  only  to  survive  the  panic,  but 
also  to  extend  assistance  to  others,  come  out  of  the  panic 
with  renewed  spirit  of  enterprise.  Moreover,  during  a 
panic  they  are  able,  at  relatively  small  cost  and  with  the 
prospects  of  more  than  average  profits,  to  satisfy  their 
ambition  for  expansion  by  making  suitable  investments. 
The  result  is  liquidation  or  absorption  of  the  concern 
seeking  assistance,  at  all  events,  however,  permanent  de- 
pendence upon  the  assisting  bank.  According  to  the 
memorial  of  the  Centralverband  des  Deutschen  Bank-  und 
Bankiergewerbes,  during  1901-2,  i.  e.,  during  and  after  the 

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National    Monetary     Commission 

panic,  no  fewer  than  41  branches  were  established  by 
banks,  mostly  in  place  of  private  banking  firms  that  had 
been  absorbed.  During  the  same  brief  period  116  bank- 
ing firms  had  gone  out  of  business.  Moreover,  quite  an 
array  of  larger  banks  might  be  cited  which  had  been  able 
to  preserve  their  independence  during  the  boom  period, 
but  which  by  adverse  circumstances  were  forced  to  seek 
the  aid  of  one  of  the  great  Berlin  banks  and  to  resign 
part  of  their  former  independence  according  to  the  looser 
on  closer  relationships  established,  being  thus  made  to  pay 
a  heavy  tribute  to  the  crisis.45 

In  1903  the  "  permanent  participations  "  of  the  Deutsche 
Bank  amounted,  in  round  figures,  to  57,000,000  marks 
(as  against  50,000,000  in  1899),  those  of  the  Disconto- 
Gesellschaft  to  58,000,000  marks  (as  against  51,000,000 
marks  in  1899). 

Confidence  plays  a  notably  large  part  in  banking,  and 
after  every  crisis  general  confidence  naturally  turns,  above 
all,  to  those  institutions  which  have  displayed  energy, 
insight,  and  power  in  going  to  the  rescue  of  other  institu- 
tions or  in  intervening  energetically  on  the  stock  exchange. 
On  the  other  hand,  there  is  a  loss  of  confidence,  often  thor- 
oughly unjustified,  in  other  institutions — that  is  to  say, 
in  the  smaller  banks  and  private  bankers.  In  other  cases 
the  safety  of  the  securities  left  on  deposit  with  those  insti- 
tutions may  be  brought  into  question,  particularly  if 
events  like  those  which  took  place  in  Berlin  during  the 
fall  of  1891  are  of  a  nature  to  disturb,  even  only  tempora- 
rily and  in  isolated  instances,  public  confidence  in  the 
safety  of  the  institutions. 


638 


The     German     Great    Banks 

Owing  to  such  causes,  the  concentration  movement  re- 
ceived a  great  impetus  from  the  prompt  and  effective 
intervention  of  the  large  banks  on  the  occasion  of  the  col- 
lapse in  1901  of  the  Pommersche  Hypotheken  Bank  (Pomer- 
anian Mortgage  Bank) ,  the  Preussische  Hypothekenaktien- 
bank  (Prussian  Mortgage  Bank,  Incorporated),  and  the 
Deutsche  Grundschuldbank  (German  Real  Estate  Mortgage 
Bank).  A  similar  effect  was  produced  by  the  notably 
energetic  intervention  of  the  Deutsche  Bank,  which  an- 
nounced the  opening  of  its  own  branch  in  Leipzig  on  the 
very  day,  June  25,  1901,  when  the  Leipziger  Bank  sus- 
pended payments. 

2.   THE   FOUNDING  OF  THE  UNITED  STATES  STEEL  CORPORATION,    FEBRUARY 

23,    I9OI. 

During  those  years  (from  1901  onward),  and  again  in 
1904,  the  record  year  in  the  rapidity  of  the  concentration 
movement,  other  important  events  exerted  a  profound 
psychologic  influence.  It  is  no  exaggeration  to  say  that 
few  events  during  the  second  epoch  (1870- 1905)  occupied 
the  thoughts  and  stirred  the  feelings  of  the  widest  circles 
so  strongly  as  the  founding  of  the  United  States  Steel  Cor- 
poration on  February  23,  1901,  with  the  enormous  capital 
of  1,100  million  dollars. 

The  Germans  had  either  overlooked  or  ignored  the  fact 
that  this  event  simply  marked  the  culminating  point,  pro- 
visional at  that,  in  a  concentration  movement  which  had 
begun  in  the  United  States  with  great  energy  as  early  as 
1 88 1  in  many  lines  of  industry,  mainly  in  the  form  of 
trusts.  The  "law  of  the  large  numbers"  has  rarely  pro- 
duced so  great  an  effect  as  in  this  case.  Not  until  this 


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National    Monetary     Commission 

culminating  event  took  place  were  Germans  of  all  classes, 
far  beyond  banking  circles  and  the  industrial  circles 
directly  concerned,  made  aware  that  Germany  would  have 
to  prepare  for  a  struggle  destined  to  grow  more  and  more 
severe,  a  struggle  which  threatened  to  be  defensive  rather 
than  offensive  and  in  which  Germany's  chances  were  not 
likely  to  be  improved  by  her  far  inferior  capital  resources. 
In  the  face  of  this  situation  it  seemed  urgently  necessary 
to  accelerate  the  movement  of  concentration.  This  neces- 
sity became  the  more  apparent  in  view  of  the  peculiar 
form  of  American  industrial  combinations,  the  trusts, 
which  involves  complete  control  of  the  associated  enter- 
prises and  of  their  business  management,  permitting  a 
reduction  in  the  cost  of  production,  an  effect  which  the 
German  cartels  had  almost  completely  failed  to  attain 
owing,  for  one  thing,  to  the  autonomy  of  the  enterprises 
included  in  the  cartels. 

3.    THE   FOUNDING   OF   THE   STAHLWERKVERBAND  (STEEL,   WORKS*  UNION)    IN 
DUSSELDORF,  MARCH    I,   1904. 

Such  a  reinforcement  of  the  concentration  movement 
seemed  demanded  both  in  the  field  of  industry,  represent- 
ing the  most  advanced  and  exposed  part  of  the  battlefield, 
as  in  the  field  of  German  banking,  the  auxiliary  of  industry. 
Thus  under  the  fresh  impression  of  the  event  that  had  oc- 
curred in  the  United  States,  the  long-continued  and  labo- 
rious efforts  to  establish  the  Steel  Works'  Union  in  Dussel- 
dorf  were,  on  March  i,  1904,  brought  to  a  successful  issue 
and  hailed  far  and  wide  as  an  auspicious  result.  This  was 
followed,  on  January  i,  1905,  by  the  founding  of  the  Upper 
Silesian  Steel  Works'  Union  (Oberschlesischer  Stahlwerkver- 
band).*6  All  these  developments  in  the  United  States 

640 


The     German     Great    Banks 

and  in  Germany  in  their  turn  gave  a  new  impetus  to  the 
movement  of  concentration  in  German  banking.  This 
movement  proceeded  by  leaps  and  bounds  during  those 
years,  especially  in  1904,  to  a  large  extent  at  the  expense 
of  the  smaller  banks. 

CHAPTER  III.  METHODS  AND  FORMS  OF  CONCENTRATION. 

SECTION    I.    OUTWARD    COURSE    OF    DEVELOPMENT. 
A.  THE  SEVERAL  GREAT  BANKS. 

The  outward  development  of  the  Berlin  great  banks,47 
of  which  as  many  as  ten  were  usually  enumerated  even  as 
late  as  1903,  is  represented  in  tabular  form  at  the  end  of 
this  book  in  Appendix  VII.  From  that  tabular  state- 
ment the  following  data  may  be  gathered  as  regards  the 
present  number  of  the  great  banks : 

The  54,000,000  marks  of  capital  of  the  Mitteldeutsche 
Kreditbank  has  been  considerably  surpassed  by  that  of 
several  provincial  banks.  Thus  the  Allgemeine  Deutsche 
Kreditanstalt  has  a  capital  of  90,000,000  marks;  the 
Rheinisch-Westfalische  Disconto-Gesellschaft,  80,000,000 
marks;  the  Rheinische  Kreditbank,  75,000,000  marks; 
the  Bergisch-Markische  Bank,  75,000,000  marks;  the 
Barmer  Bankverein,  60,000,000  marks;  the  Essener  Kre- 
ditanstalt, 60,000,000  marks.  The  capital  of  the  Com- 
merz-  und  Disconto-Bank  (85,000,000  marks)  and  of  the 
Nationalbank  fur  Deutschland  (80,000,000  marks)  was 
also  surpassed  by  that  of  the  Allgemeine  Deutsche  Kredit- 
anstalt and  was  equaled  in  1908  by  that  of  the  Rheinisch- 
Westfalische  Disconto-Gesellschaft,  and  even  surpassed  in 
1909,  when  it  reached  95,000,000  marks.  Thus  beginning 

90311° — ii 42  641 


National     Monetary     Commission 

with  January  i,  1905,  and  ranging  them  solely  by  the 
amount  of  the  capital,  the  term  great  bank  being  assumed, 
as  usual,  to  imply  a  minimum  capital  of  100,000,000 
marks,  only  the  following  six  banks  can  be  grouped  under 
that  term: 

Capital  (marks). 

1 .  Deutsche  Bank 200,  ooo,  ooo 

2.  Dresdner  Bank 180,  ooo,  ooo 

3.  Disconto-Gesellschaft 170,  ooo,  ooo 

4.  Bank  fur  Handel  und  Industrie 154,  ooo,  ooo 

5.  A.  Schaaffhausen'scher  Bankverein 145,  ooo,  ooo 

6.  Berliner  Handelsgesellschaft no,  ooo,  ooo 

But  if  we  place  the  limit  at  80,000,000  of  capital,  we 
shall  now  have  to  include  in  the  list  of  great  banks  also  the 
Rheinisch-Westfalische  Disconto-Gesellschaft  (80,000,000, 
since  1909,  95,000,000  marks),  the  Allgemeine  Deutsche 
Kreditanstalt  (90,000,000  marks),  the  Commerz-  und 
Disconto-Bank  (85,000,000  marks),  and  the  Nationalbank 
fur  Deutschland  (80,000,000  marks). 

With  80,000,000  as  the  limit,  the  term  "Berlin  great 
banks"  would  include  not  only  the  six  above  enumerated, 
which  have  their  home  office  or  at  any  rate  their  financial 
center  of  gravity  in  Berlin,  but  also  the  Commerz-  und 
Disconto-Bank  and  the  Nationalbank  fur  Deutschland,  so 
that  the  total  number  would  be  eight. 

Of  all  these  banks  the  Berliner  Handelsgesellschaft  only 
has  strictly  adhered  to  the  principle  of  absolute  centrali- 
zation; it  has  neither  branches,  nor  commandites,  nor 
deposit  offices,  nor  communities  of  interest.48 

B.  THE  AGGREGATE  CAPITAL  POWER  REPRESENTED  BY  THE  GREAT  BANK 

GROUPS. 

At  the  present  time  the  five  largest  Berlin  banks, 
together  with  their  domestic  communities  of  interest  either 
through  the  ownership  of  stock  or  through  contract,  and 

642 


Th 


e  r  m  a  n 


G 


r  e  a 


t    B 


a  n 


the  domestic  communities  of  interest  of  the  latter  (count- 
ing only  capital  and  surplus  funds,  but  not  deposits),  form 
the  following  groups,  whose  capital  power  is  given  as  per 
December  31,1 908 : 

I.  The  group  of  the  Deutsche  Bank. — Including:49 


Capital. 

Surplus. 

The  Deutsche  Bank  itself  

Marks. 

Marks. 

Also  the  following: 
i.  Bergisch-Markische  Bank  in  Elberfeld  
2.  Schlesischer  Bankverein  in  Breslau  
3.  Hannoversche  Bank  in  Hannover  
Together  with: 
(a)  Osnabriicker  Bank  in  Osnabriick  .  .  . 
(b)  Hildesheimer  Bank  in  Hildesheim  .  . 
4.  Duisburg-Ruhrorter  Bank  in  Duisburg  
5.  Essener  Kreditanstalt  in  Essen  a.  d.  R  
Together  with  the  Westfalischer  Bankverein 
in  Minister  

75,  ooo,  ooo 
30,  ooo,  ooo 

22,  SOD,  OOO 

14,  500,  ooo 
8,  ooo,  ooo 

12,  000,  000 

60,  ooo,  ooo 
8  ooo  ooo 

23,014,53^ 

II,  OOO,  000 

4,  100,  ooo 
3,775,000 

2,  20O,  OOO 
247,152 

18,  176,  ooo 

6.  Siegener  Bank  fur  Handel  und  Gewerbe  in 
Siegen    . 

7.  Sachsische  Bank  in  Dresden  . 

8.  Essener  Bankverein  in  Essen  a.  d.  R  
9.  Oldenburgische  Spar-  und  Leihbank  in  Ol- 
denburg   

15,  ooo,  ooo 

2,  200,  000 

10.  Privatbaiik  zu  Gotha  

ii.  Mecklenburger    Hypotheken-    u.    Wechsel- 
bank  in  Schwerin 

Together  with  the  Mecklenburgische  Spar- 
bank  

3,  ooo,  ooo 

xa.  Rheinische  Kreditbank  in  Mannheim  
With  the 
Mannheimer  Bank  in  Mannheim  
And  the 
Suddeutsche  Bank  in  Mannheim    .  .  . 

75,  ooo,  800 

I,  000,  000 

io,  529,  176 

IOO,  OOO 

Total  

588    900   800 

197   957   295 

Total  capital  and  surplus  combined  .  . 

786  858  095 

Adding  the  "friendly  (befreundete)  banks"  (see  Append. 
VII,  p.  993),  the  share  capital  of  the  group  is  increased 
by  212,500,000  marks,  the  surplus  funds  by  46,038,260 


643 


National    Monetary     Commission 


marks,  making  a  total  of  258,538,260  marks,  so  that  the 
total  power  of  the  group  rises  to  1,045,396,355  marks. 
II.     The  group  of  the  Disconto-Gesellschaft. — Including: 51 


Capital. 

Surplus. 

Marks. 

Marks. 

The  Disconto-Gesellschaft  itself  

i  70,  ooo,  ooo 

5  7  »  SQ2,  611 

Also: 

i.  Norddeutsche  Bank  in  Hamburg 

50,  ooo,  ooo 

IT    •*  c;  c    ooo 

2.  Allgemeine  Deutsche  Kreditans  talt  in  Leipzig  .  . 

90,  ooo,  ooo 

1  x  »  O  J  J  »  VW 

37,850,  751 

Together  with: 

(a)  A.  Busse  &  Co.  in  Berlin  

2  ,  OOO,  OOO 

129,  070 

(6)  Vogtlandische  Bank  in  Plauen  i.  V.  .  . 

5,  500,  ooo 

3,606,689 

(c)  Oberlausitzer  Bank  in  Zittau  

2,  700,  000 

735-000 

(d)  Vereinsbank  in  Zwickau  

4,  500,  ooo 

2,318,  800 

3.  Banner  Bankverein  in  Barmen 

59  ,  836  ,  200 

To   825  »  ooo 

4.  Suddeutsche  Disconto-Gesellschaft,  Mannheim. 

31,  250,  ooo 

2,  219,  716 

Subsidiary  institutions  (Tochter-Gesellschafteri)  : 

5.  Bayerische    Disconto-   und    Wechselbank    in 

Nuremberg  

I  2  ,  OOO,  OOO 

179,474 

6.  Bank  fiir  Thiiringen  vorm.  B.  M.  Strupp,  stock 

company  in  Meiningen,  capital   10,000,000 

marks,  of  which  paid  in  

IO,  OOO  ,  OOO 

i  49   o  18 

Total 

437    786    200 

6 

Add  surplus  

126,  96  1,129 

Grand  total 

564  ,  747,329 

III.   The  group  of  the  Dresdner  Bank. — Including:52 


Capital. 

Surplus. 

Marks. 

Marks. 

The  Dresdner  Bank  itself 

i  80  ,  ooo   ooo 

Also: 

i.  Markische  Bank  in  Bochum  

9,  ooo,  ooo 

i  ,  060,  ooo 

2.  Rheinische  Bank  in  Essen  

21,  000,  000 

i,  350,  ooo 

3.  Oberschlesische  Bank  in  Beuthen  

2,  5OO,  OOO 

445,000 

4.  Wiirttembergische  Landesbank  in  Stuttgart.  . 

8,  ooo,  ooo 

273,605 

5.  Oldenburgische    Landesbank    in    Oldenburg, 

3,000,000  marks,  paid  in  40  per  cent=  

I  ,  ZOO,  OOO 

677,313 

6.  Mecklenburgische  Bank  in  Schwerin,  5,000,000 

marks,  paid  in  40  per  cent  =  

2  ,  OOO  ,  OOO 

388,  662 

Together  with  the  following: 

(a)  Rostocker    Gewerbebank,     A.-G.    in 

Rostock 

980,  ooo 

T  <A     8l  C 

(&)  Neuvorpommersche  Spar-  und    Kre- 

1  j4»  °oo 

ditbank  in  Stralsund.  .  . 

I.  000.  000 

2  I  .  00  * 

644 


The     German     Great    Banks 


Capital. 

Surplus. 

Continued. 

7  .   Landgraflich  Hessische  konzessionierte  Landes- 

Marks. 

Marks. 

bank  in  Homburg  v.  d.  H  

I  ,  OOO,  OOO 

225,  006 

8.  Schwarzburgische    Landesbank    zu    Sonders- 

hausen,  2,500,000  marks  nominal,  paid  in  .  . 

I  ,  OOO,  OOO 

166,995 

Total  

227  ,  680,  ooo 

56,  262,  419 

56    262    419 

Grand  total  

283,  942,  419 

IV.   The   group    of.  the  A.  Schaaffhausen' scher  Bankve- 
rein. — Including : 53 


Capital. 

Surplus. 

Marks. 

Marks. 

The  A.  Schaaffhausen'  scher  Bankverein  itself  

145  ,  ooo,  ooo 

34,  157.  125 

Also: 

i.  Pfalzische  Bank  in  Ludwigshafen  
2.  Mittelrheinische  Bank  in  Koblenz  

50,  ooo,  ooo 
20,  ooo,  ooo 

8,849,  813 
3,171,988 

3.  With  theMulheimerBankinMulheima.d.Ruhr 

9,  ooo,  ooo 

929,075 

4.   Subsidiary  bank:    Westfalisch-Lippische  Ver- 

einsbank  A.-G.  in  Bielefeld  

7,  ooo,  ooo 

430,  ooo 

Total  

231,  ooo,  ooo 

47,538,001 

Grand  total  

278,  538,  ooi 



V.   The  group  of  the  Darmstadter  Bank. — Including:54 


Capital. 


Surplus. 


The  Darmstadter  Bank  itself 

Also: 

1.  Breslauer  Discontobank  in  Breslau 

2.  Ostbank  fur  Handel  und  Gewerbe  in  Posen55. 

3.  Nordwestdeutsche  Bank  in  Bremen 

4.  Bayerische  Bank  fur  Handel  und  Industrie.  .  . 

5.  Subsidiary  bank:    Wiirttembergische  Bankan- 

stalt  vormals  Pflaum  &  Co.".  . 


Marks 
154, ooo, ooo 

25 , ooo, ooo 

18, ooo, ooo 

33, ooo, ooo 

(56)i7,  750,000 

8,000, ooo 


Marks. 
30, 250,  ooo 

1,686,098 

2,  914,  000 

3,  500,  ooo 

887,392 

2, 450, OOO 


Total 

Add  surplus 


255, 750,000 
41,687, 490 


41,687,490 


Grand  total .  . 


297,437,490 


645 


National    Monetary     Commission 

Combining  capital  and  surplus  (with  the  reservation 
explained  above)  and  adding  those  of  the  "friendly 
(befreundete)  banks"  of  Group  I,  these  five  groups  thus 
comprise  a  capital  power  of58  2,470,061,594  marks,  or 
not  far  short  of  2,500,000,000  marks,  while  the  capital 
alone  amounted  to  1,954,617,000  marks  and  the  surplus 
funds  to  516,444,594  marks. 

Evidently  these  sums  would  be  much  higher  if  we  were 
to  add  the  deposits  used  in  the  business  of  these  banks, 
but  this  seems  to  me  improper.59  The  growth  of  these 
affiliations  is  shown  in  Appendix  VII. 

It  is  interesting  to  note  the  shiftings  that  have  occurred 
and  still  occur,  both  within  the  banks  of  a  group  and  as 
regards  their  connection  with  the  various  groups.  Thus  the 
Bergisch-Markische  Bank  in  Elberfeld,  originally  founded 
by  the  Provinzial-Discontogesellschaft  (see  note  43,  p.  862) 
belongs  not  to  the  group  of  the  Disconto-Gesellschaft 
but  to  that  of  the  Deutsche  Bank.  Again  the  Ostbank 
fur  Handel  und  Gewerbe,  belonging  to  the  group  of  the 
Darmstadter  Bank,  has  absorbed  the  Ostdeutsche  Bank 
Aktien-Gesellschaft  vormals  J.  Simon  Wittwe  in  Konigs- 
berg  in  Prussia  (province),  which  used  to  belong  to  the 
group  of  the  A.  Schaaffhausen'scher  Bankverein.  Thus 
again,  within  the  group  of  the  Deutsche  Bank,  the  Essener 
Kreditanstalt  in  1909  absorbed  the  Duisburg-Ruhrorter 
Bank  and  in  1906  the  Westfalischer  Bankverein,  with 
which  it  had  maintained  a  community  of  interest  since 
1904.  Finally  the  Emder  Bank,  which  belongs  to  the 
group  of  the  Deutsche  Bank  and  has  a  community  of 
interest  with  the  latter,  was  absorbed  in  1907  by  the 
Osnabriicker  Bank,  which  has  a  community  of  interest 
with  the  Hannoversche  Bank  (Deutsche  Bank  group). 

646 


The     German     Great    Banks 

Judging  from  the  past  course  of  concentration,  partic- 
ularly as  affecting  the  provincial  banks  in  recent  years, 
it  would  seem  that  the  end  of  concentration  in  German 
banking,  at  least  outside  of  Berlin,  is  not  yet  in  sight. 

SECTION  2.  GENERAL  TENDENCIES  AND  FORMS  OF 
CONCENTRATION. 

I.  SCHEME  OP  GENERAL,  DEVELOPMENT. 

The  concentration  in  German  banking  was  on  the  one 
hand  a  local  concentration  of  banks  in  Berlin;  on  the 
other  hand  a  concentration  of  capital  and  power. 

The  latter  was  accomplished  either — 

(A)  In  a  direct  way,  to  wit: 

(1)  By  increase  of  capital. 

(2)  By  affiliation   of   enterprises    (banks   or   private 

banking  establishments) . 

(3)  By  the  creation   of  permanent  communities  of 

interest,  to  wit: 

(a)  By  the  founding  of  subsidiary  or  trust  com- 

panies. 

(b)  By  the  acquisition  of  shares. 

(c)  By  agreement. 

(d)  By  exchange  of  shares. 
Or  it  was  accomplished — 

(B)  In    an     indirect    way,60    by    decentralization    of 

operation,  to  wit: 

(1)  By  the  founding  of  commandites  (silent  partner- 

ships) . 

(2)  By  the  founding  of  branches. 

(3)  By  the  founding  of  agencies. 

(4)  By  the  founding  of  deposit  offices. 


647 


National    Monetary     Commission 

In  this  classification  the  term  "  local  ('ortliche')  con- 
centration" is  coextensive  with  the  term  "local  ('lokale') 
concentration"  used  by  Ad.  Weber,61  and  the  term 
concentration  of  capital  is  coextensive  with  Ad.  Weber's 
term  concentration  of  property  (Vermogenskonzentra- 
tiori) — i.  e.  absorption  of  previously  independent  institu- 
tions or  increase  of  capital.  Under  the  term  "  concentra- 
tion of  capital  and  power"  I  have  comprehended  both 
Ad.  Weber's"  concentration  of  property  "  and  his  "  admin- 
istrative concentration"  (founding  of  friendly  institutions, 
extension  of  the  network  of  branches,  in  certain  cases  the 
undertaking  of  liquidations  and  reorganizations) . 

I  used  this  expression  "concentration  of  capital  and 
power"  because  it  is  hardly  accurate  to  speak  of  a  "con- 
centration of  capital"  when  the  actual  operation  consists 
in  a  decentralization  of  operation  through  the  founding  of 
commandites,  branches,  agencies,  and  deposit  offices,  while 
this  operation  certainly  involves  a  concentration  of  power. 
To  my  mind  Weber's  term,  "administrative  concentra- 
tion," is  liable  to  the  same  objection,  when,  as  in  the  case 
of  an  extension  of  the  network  of  branches,  the  actual 
operation  involves,  not  administrative  concentration,  but 
the  very  contrary,  viz,  decentralization  of  functions. 

On  the  other  hand,  I  purposely  excluded  from  my 
scheme  of  concentration  the  operation  called  by  Ad.  Weber 
"concentration  of  interests,"  to  wit,  "combinations  of 
banks  for  the  common  pursuit  of  definite  single  interests; 
for  example,  the  Prussian  syndicate,  the  Rothschlid 
group."  In  so  doing  I  was  led  by  the  consideration 
pointed  out  in  the  footnote  2,  on  page  233  of  the  second 
edition,  that  the  formation  of  syndicates  or  groups,  while 

648 


The     German     Great    Banks 

constituting  one  of  the  factors  which  indirectly  promote 
concentration,  is  not  prompted  by  any  conscious  aim  to 
bring  about  concentration.  On  the  contrary,  this  forma- 
tion of  permanent  syndicates  or  groups  is  due  to  entirely 
different  motives  and  pursues  quite  different  aims.  It  is 
founded  on  the  principle  of  the  distribution  of  risk,  and 
aims  at  a  greater  safeguarding  of  the  underwriting  or 
issuing  bank,  on  the  one  hand,  and,  on  the  other,  at  facil- 
itating the  issue  operation,  etc. 

However,  I  am  in  complete  accord  with  Weber  as  re- 
gards the  bearing  of  his  classification,  and  I  hope  that  the 
present  work  will  prove  it.  If  such  is  the  case,  the  ques- 
tion of  the  true  scheme  is  immaterial.  Both  he  and  I  are 
trying  to  lay  bare  the  motives,  the  internal  or  external 
factors  that  lead  to  concentration.  He  tries  to  show 
where  concentration  in  banking  leads  to  concentration  in 
industry,  and  vice  versa.  To  this  I  had  not  devoted  suffi- 
cient attention  in  earlier  editions  of  this  book,  while  in  the 
present  edition  I  have  laid  special  stress  on  it  (see  Part  V, 
p.  703,  et  seq.). 

In  connection  with  this  subject  the  following  remarks 
may  not  be  inappropriate. 

On  surveying  the  process  of  development,  especially  in 
recent  time,  I  can  not  agree  with  Weber's  statement  that 
the  great  banks  show  an  unmistakable  course  toward 
specialization,  inasmuch  as  the  A.  Schaaffhausen'scher 
Bankverein  devotes  special  attention  to  mining,  the 
Dresdner  Bank  to  the  textile  and  chemical  industries, 
the  Deutsche  Bank  to  the  electrical  industry  and  oversea 
trade,  the  Discontogesellschaft  to  transportation — the 
Darmstadter  Bank  not  being  mentioned.  So  far  as  such 


649 


National    M on  et ar y     Commission 

specialization  can  be  observed,  it  may  at  least  in  part  be 
explained  historically.  Thus  in  the  case  of  the  A.  Schaaff- 
hausen'scher  Bankverein,  the  special  attention  to  mining 
in  the  Rhenish- Westphalian  district  may  be  explained  by 
its  geographic  location  and  by  its  continuation  of  the  old 
connections  of  the  A.  Schaaffhausen  banking  house  from 
which  it  sprang;  in  the  case  of  the  Dresdner  Bank  by  its 
special  connections  with  the  industry  of  Saxony.  To 
some  extent  this  specialization  was  merely  the  expression 
of  a  definite  program,  whereby,  for  example,  the  Deutsche 
Bank  was  led  to  devote  special  energy  to  the  development 
of  the  deposit  business,  of  oversea  business  relations,  and 
the  vigorous  promotion  of  the  policy  of  industrial  exports 
(see  above,  Ch.  Ill,  sec.  6,  under  i). 

Such  specialization  as  did  exist  has  become  less  and  less 
pronounced,  for  the  reason  that  the  scope  of  banking  ac- 
tivity has  constantly  widened,  each  bank  being  led,  even 
if  only  by  competitive  reasons,  to  extend  its  activity  to 
departments  in  which  previously  some  other  bank  had 
been  predominant.  Thus,  for  example,  it  would  be  de- 
cidedly inexact  to  say  nowadays  that  the  Deutsche  Bank 
makes  a  specialty  of  the  over-sea  or  the  electric  business, 
or  even  that  it  devotes  its  main  attention  to  them,  the 
Disconto-Gesellschaft  and  the  Berliner  Handelsgesell- 
schaft  being  its  close  rivals,  the  former  in  the  over-sea  busi- 
ness, the  latter  in  the  electric  business. 

Similarly,  as  shown  by  Jeidels  and  in  the  present  work,  the 
mining  industry  has  long  ceased  to  be  the  special  preserve 
of  the  A.  Schaaffhausen 'scher  Bankverein,62  which,  in 
fact,  is  no  longer  completely  dominant  in  its  own  home 
district.  In  the  matter  of  banking  relations  to  the  mining 


650 


The     German     Great    Banks 

industry  it  has  been  either  equaled  or  surpassed  by  a  num- 
ber of  other  banks,  such  as  the  Dresdner  Bank,  the  Ber- 
liner Handelsgesellschaft,  the  Disconto-Gesellschaft,  and 
the  Deutsche  Bank.  Of  the  Dresdner  Bank,  too,  it  can  no 
longer  be  said  that  the  textile  and  chemical  industries  are 
its  special  province.63 

In  the  field  of  transportation  all  the  great  banks  are 
to-day  as  active  as  the  Disconto-Gesellschaft,  while  in  the 
special  field  of  local  and  street  railways  the  Dresdner  Bank, 
the  Berliner  Handelsgesellschaft,  and  the  Darmstadter 
Bank  are  about  equally  represented. 

Thus  in  speaking  of  the  business  activity  of  the  great 
banks  we  can  no  longer  speak  of  specialties,  but  only  of 
more  or  less  pronounced  tendencies. 

These  criticisms,  however,  are  directed  only  against  one 
of  the  arguments  underlying  Weber's  proposal.  The  pro- 
posal itself,  as  I  have  tried  to  show  in  this  third  edition,  is 
none  the  less  well  founded. 

Rud.  Eberstadt 64  proposes  a  distinction  between  a 
"centralization  of  capital "  and  a  "centralization  of  organi- 
zation," according  as  the  capital  or  the  organization  is  con- 
centrated at  a  single  point.  I  have  not  been  able  to  con- 
vince myself  of  the  propriety  of  this  distinction.  At  any 
rate  it  does  not  bring  out  any  factor  of  decisive  impor- 
tance in  German  development,  and  hence  fails  to  render 
the  subject  clearer,  since  the  two  kinds  of  concentration 
are  as  apt  to  occur  in  combination  as  separately. 

II.  THE  Two  PERIODS  IN  THE  HISTORY  OP  CONCENTRATION. 

Two  periods  may  be  distinguished  in  the  process  of  con- 
centration. 

In  the  first  period  (1870-1897)  the  tendency  toward 
concentration  made  itself  felt  along  those  lines  which  had 

65* 

i 


National     Monetary     Commission 

led  to  concentration  in  industry  and  commerce — that  is  to 
say,  first  of  all,  through  the  system  which,  after  the  prece- 
dent of  industrial  combinations,  we  have  called  the 
"mixed"  method  of  operation — the  combination  of  the 
current  business  (including  the  deposit  business)  with  the 
founding,  transformation,  and  issue  business;  next  by 
way  of  increases  of  capital  and  through  the  various  forms 
of  decentralization  of  operation,  such  as  commandites, 
branches,  agencies,  and  deposit  offices.  Of  the  great 
banks  the  only  ones  that  remained  completely  centralized 
during  that  period  were  the  Disconto-Gesellschaft  and  the 
Berliner  Handelsgesellschaft,  while  the  Nationalbank  fur 
Deutschland  also  remained  almost  completely  outside  the 
process  of  decentralization. 

During  the  second  period  (1897  to  date)  the  tendency 
toward  concentration  manifested  itself  to  an  ever-increas- 
ing degree,  not  so  much  in  the  decentralization  of  opera- 
tions as  in  the  extension  of  community-of-interest  rela- 
tions, whose  main  object  is  the  strengthening  of  industrial 
connections,  together  with  the  broadening  of  the  basis  of 
issues  and  the  increase  in  marketing  power. 

During  this  period  the  Berliner  Handelsgesellschaft  was 
the  only  one  that  remained  completely  centralized. 

In  both  periods  the  choice  of  the  forms  of  concentration 
was  dominated  by  economic  considerations  which  may  be 
formulated  as  follows: 

Among  the  various  forms  available  the  preference  is 
always  given  to  that  which  is  deemed  most  likely  to  enable 
the  nearest  and  most  important  aim  to  be  reached  not 
only  most  fully,  but  also  most  simply  and  quickly,  and 
with  the  least  possible  cost  and  risk. 


652 


The     German     Great    Banks 

SECTION  3.    THE    SEVERAL   WAYS  AND    FORMS    OF    CONCEN- 
TRATION, THEIR  ADVANTAGES  AND  DISADVANTAGES. 


Some  of  the  advantages  and  disadvantages  of  concen- 
tration become  manifest  from  the  discussion  of  the  various 
ways  and  forms  which  the  process  of  concentration 
assumed  in  the  German  banking  business.  This  discussion 
may  most  conveniently  follow  the  scheme  given  above 
(Sec.  2,  under  I,  pp.  647  et  seq.)  for  the  general  direction 
of  concentration. 

I.  LOCAL  CONCENTRATION. 

After  what  we  have  said  of  the  economic  development 
of  Germany  in  general,  and  of  Berlin  in  particular,  it  will 
readily  be  understood  that  the  capital  city  became  a 
special  point  of  attraction  for  banks  and  bank  capital.65 
The  drift  toward  the  capital,  in  which  most  of  the  federal 
offices  of  the  Empire  are  located,  naturally  became  most 
pronounced  in  the  banking  business,  because  the  city  of 
Berlin,  with  the  exceedingly  rapid  growth  of  its  popula- 
tion, which  meant  a  vast  increase  in  the  number  of  wage- 
earners  and  consumers,  became  not  only  the  central  point 
of  wholesale  demand  and  wholesale  consumption,  of  finan- 
cial, tax-paying,  and  purchasing  power,  and  of  numerous 
industrial  and  mercantile  enterprises,  but  also  the  most 
powerful  focus  of  attraction  for  available  funds.  It  be- 
came the  seat  of  a  number  of  the  most  important  gov- 
ernment offices  and  establishments  closely  connected  with 
our  system  of  payments  and  credit,  in  part  also  with 
the  issue  business.  Among  these  may  be  mentioned  the 
Reichsbank,  established  in  1875-76,  the  Seehandlung,  the 
increasingly  influential  Berlin  Bourse,  the  Bank  des  Ber- 
liner Kassenvereins,  founded  as  early  as  1850,  etc. 

653 


National    Monetary     Commission 

Accordingly,  we  find  that  very  soon  after  the  establish- 
ment of  the  German  Empire  the  German  banks  established 
during  the  first  epoch,  with  main  offices  outside  of  Berlin, 
hastened,  one  after  the  other,  to  open  offices  in  Berlin.66 
The  following  are  worthy  of  note: 

1871.  The  Bank  fur  Handel  und  Industrie  (Darmstadt). 

1873.  The  Mitteldeutsche  Kreditbank  (Meiningen,  later 
Frankfort-on-the-Main) . 

1 88 1.  The  Dresdner  Bank  (Dresden). 

1891.  The  A.  SchaafThausen'scher  Bankverein  (Cologne) . 

1898.  The  Commerz-  und  Disconto-Bank  (Hamburg).67 

From  the  moment  these  branches  were  established,  the 
business  center  of  these  banks  tended  more  and  more  to 
be  shifted  to  Berlin,68  so  that  they  have  for  many  years 
been  classed  as  Berlin  banks  and  reckoned  among  the 
Berlin  great  banks.  In  the  case  of  the  A.  Schaaffhausen'- 
scher  Bankverein,  it  is  to  be  noted,  this  displacement  was 
effected  only  in  a  qualified  sense. 

This  process,  of  which  the  recent  acquisition  of  the 
banking  firm  Hardy  &  Co.  G.  m.  b.  H.  in  Berlin  (in  1909) 
by  the  Rheinisch-Westfalische  Disconto-Gesellschaft  in 
Aachen  (Aix-la-Chapelle)  formed  an  interesting  continu- 
ation, must  not  be  overlooked.  It  tends  to  disprove  the 
alleged  contrast  of  "the  general  tendency  of  develop- 
ment "  in  England,  based  on  the  supposition  that  the  expan- 
sion of  banking  in  England  proceeded  from  the  provinces 
toward  London,  while  in  Germany  it  proceeded  from  the 
capital  toward  the  provinces.69  Furthermore,  it  must 
not  be  forgotten  that  the  establishment  of  branches  in 
Berlin  must  have  appeared  to  the  provincial  banks  in 


654 


The     German     Great    Banks 

general,  up  to  1897,  as  an  enterprise  of  questionable 
promise,  in  view  of  the  tremendously  rapid  rise  of  the 
financial  power  of  the  Berlin  banks.  After  1897,  of  course, 
the  amalgamated  banks  (Konzernbankeri)  had  no  longer 
any  motive  to  establish  branches  in  Berlin.  The  estab- 
lishment of  a  community  of  interests  between  the  Deutsche 
Bank,  the  Bergisch-Markische  Bank,  and  the  Schlesischer 
Bankverein  in  1897  is  expressly  stated  in  the  1897  busi- 
ness report  of  the  Deutsche  Bank  to  have  been  prompted 
by  the  following  considerations : 

"The  continued  concentration  of  the  banking  business 
in  Berlin,  which  has  already  led  a  number  of  provincial  insti- 
tutions to  establish  branches  in  Berlin,  seemed  to  make  it 
necessary  that  our  connections  with  the  provinces  be 
strengthened." 

Here  we  see  that  the  expansion  toward  the  provinces  is 
positively  described  as  a  consequence  of  the  movement, 
already  in  progress,  of  the  provincial  banks  toward  Berlin. 

For  that  matter,  even  as  regards  England,  we  must 
remember  that  the  movement  of  the  provincial  banks 
toward  the  capital,70  which  I  agree  with  Eberstadt  in  re- 
garding as  a  "  natural "  movement,  did  not  begin  until  late, 
having  been  artificially  kept  back  by  legislation.  Only 
since  1833  have  provincial  banks  been  allowed  to  establish 
themselves  in  London,  and  within  a  radius  of  65  English 
miles,  and  even  then  only  on  condition  that  they  were  to 
issue  no  bank  notes.71  Later  on  the  situation  was  re- 
versed, owing  to  certain  advantages  which  were  granted 
only  to  banks  domiciled  In  London.  In  particular,  the 
provincial  banks,  in  order  to  secure  for  themselves  and 


655 


National     M  o  n  et  ar  y     Commission 

their  customers  the  advantages  of  participation  in  the 
"country  clearing,"  had  to  appoint  as  clearing  agent  a 
banking  firm  domiciled  in  Condon  and  belonging  to  the 
clearing  house,  and  to  make  a  large  deposit  with  that  firm. 
Finally,  beginning  with  1896,  a  tendency  of  the  London 
banks  to  spread  to  the  provinces  has  been  observed.72 

II.  THE  CONCENTRATION  OP  CAPITAL,  AND  POWER. 

A.    IN    A    DIRECT    WAY. 

i .  By  means  of  increase  of  capital. — In  the  preceding  pages 
we  have  had  repeated  occasion  to  speak  of  that  kind  of 
concentration  of  capital  which  finds  its  expression  in  in- 
creases of  capital  and  which  is  going  on  in  other  countries 
as  well  as  in  Germany.73  We  have  pointed  out  in  par- 
ticular the  limits  within  which  it  is  confined,  both  for 
economic  and  of  business  reasons.74  Increases  of  capital 
were  prompted75  both  by  external  processes,  such  as  the 
founding  of  branches,  the  absorption  of  banks,  the  estab- 
lishment of  communities  of  interest  through  exchange  of 
stock,  etc.,  and  by  internal  reasons.  Foremost  among  the 
latter  is  the  necessity  of  obtaining  the  means  of  strength- 
ening and  extending  the  current  business  and  to  establish 
the  equilibrium  of  the  balance  sheet,  the  liquidity.  Ac- 
cording to  sound  principles,  the  increase  of  the  bank's  own 
capital  must  take  place  also  in  those  cases  in  which  the 
volume  of  business  has  largely  grown  through  the  increase 
of  outsiders'  funds  entrusted  to  the  bank. 

It  may  be  said  that  the  undertaking  or  omission  of  such 
increases  of  capital  at  the  right  moment  and  in  sufficient 
amounts  furnishes  a  test  of  the  perception,  prudence,  and 


656 


The     German     Great    Banks 

foresight  of  the  bank's  administration.  However,  the 
movers  for  an  increase  of  capital  must  often  be  prepared 
for  disappointment  at  the  bourse,  which,  as  a  rule,  is  not 
interested  in  an  increase  of  capital,  unless  there  is  left  a 
rather  wide  margin  between  the  rate  of  issue  of  the  new 
and  the  market  rate  of  the  old  shares,  which  opens  the 
field  for  speculative  operations. 

It  is  interesting  to  study  the  increases  of  capital  of  the 
great  banks. 

The  capital  of  the  four  oldest  banks  increased  as  follows : 

[Amounts  expressed  in  millions  of  marks.] 


Year 

Capital. 

of  foun- 
dation. 

At  foun- 
dation. 

1870. 

End  of 

1908. 

DarmstadterBank  ™  
Berliner  Handelsgesellschaft  77  

1853 
1856 

17-1 
16.8 

25.8 
16.8 

iS4 
no 

Disconto-Gesellschaft  78 

185  1 

30  o 

A.  Schaaffhausen'scher  Bankverein  79  

1848 

15.6 

15.6 

145 

Total  .    . 

79   5 

88.  a 

579 

While  the  capital  of  the  Mitteldeutsche  Kreditbank, 
also  one  of  the  oldest  banks  (founded  in  1856  with  a  capi- 
tal of  24,000,000  marks;  see  above,  pages  77  et  seq.), 
had  by  the  end  of  1905  risen  to  54,000,000  marks,  hav- 
ing thus  little  more  than  doubled,80  the  four  banks  above 
enumerated,  during  the  twenty-one  years  from  1848  to 
1869,  increased  their  capital  only  by  8,700,000  marks; 
on  the  other  hand  in  the  thirty-eight  years  from  1870  to 
the  end  of  1908  their  capital  rose  from  88,200,000  to 
579,000,000  marks,  having  thus  multiplied  more  than 
sixfold  8l 


90311"— ii- 


-43 


657 


National    Monetary     Commission 

The  capital  of  the  two  banks  founded  in  the  beginning 
of  the  second  epoch  (1870  and  1872)  increased  as  follows: 

[Amounts  expressed  in  millions  of  marks.] 


Year  of 
foun- 
dation. 

Capital. 

At  foun- 
dation. 

End  of 
1908. 

1870 
1872 

15-0 
9-6 

200 

180 

Dresdner  Bank  **  

Total    

24.6 

380 

Thus  in    thirty-nine  and    thirty-seven  years,   respec- 
tively, it  multiplied  more  than  fifteenfold. 

The  capital  of  the  other  great  banks  increased  as  follows 

[Amounts  expressed  in  millions  of  marks.l 


Year  of 
foun- 
dation. 

Capital. 

At  foun- 
dation. 

End  of 

1908. 

Commerz-und  Disconto-Bank  8<  

1870 
1881 

IS 
20 

85 
80 

Nationalbank  fur  Deutschland  w.  . 

Total  

35 

165 

Thus  the  increase  was  more  than  fourfold. 

2.  Through'  absorption  of  banking  firms  and  fusion  of 
banks. — We  have  already  discussed  the  main  reasons 
that  led  to  the  concentration  of  capital  through  the  ab- 
sorption of  private  banking  firms. 

Up  to  the  end  of  1908  the  great  banks  had  directly 
absorbed  only  private  banking  firms,  while  the  number 
of  banks  combined  with  them  through  fusion  was  only  1 1 . 

On  the  other  hand,  the  5  bank  groups  (Konzernbanken) , 
according  to  Appendix  VIII  at  the  end  of  this  book,  had 


658 


The     German     Great    Banks 

up  to  the  end  of  1908  absorbed  89  private  banking  firms 
and  43  banks,  as  follows: 


Private 
banking 
firms. 

Banks. 

Daraistadter  Bank  group  

ij 

Disconto-Gesellschaft  group    

g 

Dresdner  Bank  group  

7 

i 

A  Schaaffhausen'scher  Bankverein  group 

5 

Total 

80 

Thus  the  great  banks  and  bank  groups  together  had, 
up  to  December  31,  1908,  absorbed  129  private  banking 
firms  and  54  banks.  Including  the  firms  absorbed  by 
the  banks  before  their  fusion  with  the  great  banks,  or 
by  subsidiary  banks  of  the  latter,  the  total  number  ab- 
sorbed by  the  great  banks  and  their  " concerns"  up  to 
December  31,  1908,  included  164  private  banking  firms 
and  60  banks. 

The  provincial  banks  which  remained  independent 
show  a  similar  record.86 

Such  absorptions  were  often  prompted,  outwardly,  by 
the  desire  of  the  banks  to  gain  a  firm  footing,  a  wide 
circle  of  customers  and  business  relations  for  contem- 
plated  branches  by  the  acquisition  of  flourishing  private 
banking  firms  at  the  localities  in  question.  Those 
(domestic)  branches  that  were  established  without  such 
absorption  were  in  fact  greatly  in  the  minority,  and,  as 
might  be  expected,  had  as  a  rule  to  pass  through  a  much 
longer  time  of  waiting  until  they  were  established  on  a 
fairly  paying  basis,  with  appreciable  influence  in  their 
district.  Generally,  also,  their  dependence  on  the  home 


659 


National     Monetary     Commissio 


n 


office  continued  a  good  deal  longer.  The  number  of 
branches  created  by  means  of  such  absorption  or  without 
it  varies  greatly  in  the  case  of  the  different  banks.  In  the 
case  of  the  Dresdner  Bank  the  great  majority  of  its  27 
branches  originated  in  such  absorptions;  in  the  case  of 
the  Disconto-Gesellschaft,  which  up  to  1908  had  only  3 
branches,87  2  of  them,  Bremen  and  Frankfort-on-the-Main, 
originated  in  that  way,  the  latter  branch  having  assumed 
at  least  a  large  part  of  the  business  connections  of  the 
firm  of  M.  A.  von  Rothschild  and  Sons;  in  the  case  of  the 
Deutsche  Bank,  out  of  8  branches  only  3  were  the  result 
of  absorption,  viz,  those  of  Leipzig,  Dresden,  and  Frank- 
fort-on-the-Main;88  finally,  in  the  case  of  the  Darmstad- 
ter  Bank,  out  of  n  branches  only  2,  those  of  Hanover 
and  Halle-on-the-Saale,  were  acquired  in  that  way. 

A  similar  condition  prevails  among  the  banks  belonging 
to  the  groups.  Of  these  the  Pfalzische  Bank,  belonging 
to  the  Dresdner  Bank-Schaaffhausen  community  of  inter- 
est, established  nearly  all,  if  not  all  of  its  16  branches  in 
this  way.  The  same  is  true  in  the  main  also  of  the  great 
provincial  banks,  such  as  the  Bergisch-Mdrkische  Bank, 
the  Magdeburger  Bankverein,  the  Magdeburger  Privatbank, 
the  Bayer  is  che  Vereinsbank,  and  the  Bayerische  Handels- 
bank. 

The  absorption  of  banks  by  way  of  fusion  also  took 
place  for  the  most  part  with  a  view  to  the  creation  of  a 
basis  for  the  establishment  of  branches.     Aside  from  this  ' 
aim,  however,  fusion,  as  we  have  seen,  never  played  an 
important  part,  either  in  the  case  of  the  great  banks  or  in  \ 
that  of  the  so-called  ''concern  "  banks,89  which,  according 
to  Table  VII,  absorbed  during  the  second  epoch  only  a 


660 


The     German     Great    Banks 

total  of  20  banks.  Experience  teaches  that  at  each  fusion 
a  number  of  connections,  some  of  them  quite  valuable,  are 
lost,  being  taken  away  by  competitors,  etc.  Hence  fusion 
is  not  attempted  unless  prompted  by  special  business 
reasons,  particularly  the  following: 

(a)  To  get  permanently  rid  of  inconvenient  competition. 
Cases  of  this  kind  are  exceedingly  rare.     In  the  case  of  the 
provincial  banks  the  fusion  of  the  Dresdner  Bankverein, 
with  a  capital  of  21,000,000  marks,  with  the  Sachsische 
Discont-Bank  (capital,  3,000,000  marks),  effected  in  1905, 
may  be  cited  under  this  head. 

(b)  To   secure   an   extension   of  business  connections. 
This  refers  to  those  cases  where  the  institution  to  be  fused 
with  the  expanding  bank  is  pursuing  about  the  same  busi- 
ness policy  in  the  same  or  another  district  (province,  fed- 
eral state),  having,  for  example,  for  many  years  devoted 
itself  to  the  commission,  current  account,  or  bill  business, 
like  the  expanding  bank.     (Example:    The  fusion  of  the 
Magdeburger  Privatbank  at  Magdeburg  with  the  Dresdner 
Bankverein  in  Dresden,  in  1909.) 

(c)  When  a  bank  is  unable  either  from  the  very  start 
or  not  to  the  proposed  extent,90  or  when  it  is  no  longer 
able  to  accomplish  its  purpose,91  its  fusion  with  another 
bank  may  sometimes  be   accomplished  under  specially 
favorable  conditions  for  the  latter.     In  such  cases  the 
fusion  is  as  a  rule  a  forced  one  so  far  as  the  less  successful 
bank    is   concerned.92     One    of    the    specially    favorable 
conditions  in  such  cases  may  be  this,  that  the  intrinsic 
value  (liquidation  value)  of  the  bank  to  be  absorbed  by 
fusion  may  greatly  exceed  the  purchase  price  of  its  stock, 
so  that  the  absorbing  bank  thus  acquires  silent  reserves, 


661 


National    Monetary     Commission 

provided,  of  course,  that  the  status  assumed  to  exist  at 
the  moment  of  fusion  is  not  altered  in  the  course  of  liqui- 
dation through  diminished  returns  or  losses.93 

Such  a  forced  fusion  may  also  occur  when  a  bank  be- 
longing to  a  bank  group  is  induced,  through  pressure 
exerted  by  the  leading  bank,  to  fuse  with  another  bank  of 
the  same  group.  Such  a  case  occurred  in  1905,  when  the 
Ostfriesische  Bank,  having  suffered  considerable  loss 
through  a  bankruptcy,  was  induced  to  fuse  with  the 
Osnabrucker  Bank. 

Motives  of  a  different  nature,  but  yet  belonging  to  the 
domain  of  group  policy,  led  in  1909  to  the  absorption  of 
the  Duisburg-Ruhrorter  Bank  by  the  Essener  Kreditan- 
stalt,  the  latter,  together  with  the  Deutsche  Bank,  as  the 
leader  of  the  group,  having  in  1902  acquired  a  majority  of 
the  stock  of  the  Duisburg-Ruhrorter  Bank. 

In  foreign  countries  the  concentration  of  banks  was  ac- 
complished mainly  by  way  of  fusion.  Thus  in  Scotland  as 
early  as  1829-1844  there  were  no  fewer  than  16  fusions  of 
great  banks,  followed  by  4  more  during  i85y-i864.94 
In  England  fusions  were  the  ordinary  way  by  which  pro- 
vincial banks  expanded  and  finally  made  their  entrance 
into  London.  According  to  the  Bankers'  Magazine  (Lon- 
don) ,  the  number  of  bank  fusions  in  Great  Britain  was  as 
follows:  1877-1886,  42;  1887-1898,  124;  1889-1905,  86. 
In  London  alone  the  number  of  private  banks  (excluding 
colonial  banks)  was  thereby  diminished  from  1 15  in  1885  to 
38  in  1905,  while  the  number  of  joint-stock  banks  decreased 
from  112  in  1889  to  62  in  1905.  One  bank,  now  known  as 
the  London  City  and  Midland  Bank,  founded  under  another 
name  in  1836  in  Birmingham,  in  its  career  of  expansion 


662 


„ 


The     German     Great    Banks 

and  concentration  absorbed  not  less  than  some  20  pro- 
vincial banks  and  2  great  London  banks,  while  another, 
the  Lloyd's  Bank,  in  twenty-one  years  (1884-1904) 
swallowed  35  other  banks.  In  England  the  huge  bank- 
ing establishments  were  invariably  formed  by  the  absorp- 
tion of  the  small  or  medium-sized  banking  firms  within 
their  territory,  either  step  by  step  or,  if  an  opportunity 
presented  itself,  at  one  fell  swoop.  The  number  of  bank- 
ing firms  incorporated  in  the  large  firms  during  the  recent 
decades  is  exceedingly  great;  the  external  organization  of 
English  banking  has  thereby  been  completely  altered  since 
1880.  The  process  of  fusion  continues,  and  has  become 
rather  more  pronounced  during  recent  years.95  In  1909 
a  fusion  was  effected  between  two  of  the  most  powerful  and 
oldest  London  deposit  banks,  the  London  and  Westmin- 
ster Bank  (Limited)  and  the  London  and  County  Banking 
Company  (Limited).  The  former  was  the  oldest  deposit 
bank  in  London  (founded  in  1834);  the  latter  was  estab- 
lished in  1836,  had  222  offices,  and  over  £40,000,000  ster- 
ling in  current  and  deposit  accounts.  The  united  bank 
will  bear  the  name  London  County  and  Westminster  Bank 
(Limited) ,  with  a  capital  of  £14,000,000  sterling,  (£3,500,- 
ooo  paid  up), surplus  funds  to  the  amount  of  £4,250,000  in 
round  figures,  and  current  and  deposit  accounts  to  the 
amount  of  more  than  £70,000,000,  which  will  put  it  in  the 
second  place  among  the  deposit  banks  of  Great  Britain. 

"The  growth  of  banks  solely  through  the  extension  of 
;heir  own  system  of  branches,  without  any  amalgamation 
with  existing  banks,  occurs  only  where  the  aim  is  to  open 
up  entirely  new  territory  not  previously  reached  by  bank- 
ing operations."'6  In  the  period  1877-1904  not  fewer 


663 


National     Monetary     Commissio 


n 


than  224  banks  were  absorbed  in  England  by  other  banks 
which  still  exist. 

In  the  United  States,  in  which  the  concentration  on  the 
whole  tends  to  be  effected  rather  by  way  of  communi- 
ties of  interest  of  great  groups  of  banks,  21  national 
banks  were  in  1901  absorbed  by  other  national  banks  and 
6  by  other  banks;  in  1902,  46  by  national  banks  and  1 1  by 
other  banks;97  in  1903-4,  altogether,  38  banks.  In 
France,  fusions  of  different  banks  are  of  frequent  occur- 
rence in  the  case  of  the  so-called  banques  d'affaires,  while 
they  have  been  rare  among  the  great  credit  institutions, 
which,  however,  have  absorbed  many  private  banking 
firms.98 

3.  Through  the  creation  of  permanent  communities  of  in- 
terest.— Since  1897  the  process  of  concentration  in  Ger- 
man banking  has  been  mainly  effected  in  the  form  of  com- 
munities of  interest  between  great  banks  and  provincial 
banks,  mostly  brought  about  through  an  exchange  of 
stock. 

At  the  end  of  1896  there  were  only  two  (domestic)  com- 
munities of  interest,  to  wit: 

(1881)  That  of  the  Wurttembergische  Bankanstalt  vor- 
mals  Pflaum  &Co.  (subsidiary  of  the  Bank  fur  Handel  und 
Industrie)  with  the  Wurttembergische  Vereinsbank,  this 
community  being  based  on  agreement.99 

(1895)  That  of  the  Disconto-Gesellschaft  with  the  Nord- 
deutsche  Bank,  based  on  ownership  of  shares. 

Between  the  beginning  of  1897  and  the  end  of  1900  as 
many  as  9  (domestic)  communities  of  interest  were  en- 
tered into,  so  that  the  number  of  them  had  quadrupled  by 
the  end  of  1900. 


664 


The     German     Great    Banks 


By  the  end  of  1902  the  number  had  risen  to  16,  an  eight- 
fold increase,  compared  to  1895;  by  the  end  of  1908  it  had 
risen  to  32,  and,  including  the  subcommunities  of  interest 
of  the  banks  in  the  groups  (Appendix  VIII),  to  41,  a 
twenty-two-fold  increase  over  1896. 

The  lion's  share  in  this  increase  belongs  to  the  years 
1904  and  1905,  in  which  18  communities  of  interest, 
including  those  of  the  banks  in  the  groups  (Konzern- 
bankeri),  were  entered  into,  as  follows: 


Leading 
bank. 

Other 
banks  of 
the  group 

Bank  fur  Handel  und  Industrie               .        

I 

Deutsche  Bank  

6 

I 

Disconto-Gesellschaft  

2 

Dresdner  Bank  

6 

2 

Total  

I  C 

*2 

Communities  of  in- 
terest formed  by 
the— 


On  December  31,  1908,  the  communities  of  interest,  en- 
tered into  both  by  principal  and  subsidiary  banks  within 
the  groups  up  to  that  date,  were  distributed  as  follows: 


Leading 
bank. 

Other 
banks  of 
the  group. 

Bank  fur  Handel  und  Industrie    

4. 

Deutsche  Bank     .    .        .            

r« 

Disconto-Gesellschaft  

c 

1. 

Dresdner  Bank  

8 

2 

A.  Schaaffhausen  'scher  Bankverein     

2 

j 

Total   ...        .                   

•70 

Communities  of  in- 
terest formed  by 
the— 


665 


National    Monetary     Commission 

Of  these  communities  of  interest,  not  less  than  13 
belong  to  the  mining  districts,  Rhineland- Westphalia  and 
Upper  Silesia,  distributed  as  follows:100 

I.  In  Upper  Silesia. — Communities  of  interest: 


Capital. 


1.  Of  the  Bank  fur  Handel  und  Industrie  with  the  Breslauer  Disconto-  Marks. 

Bank  in  Breslau  (10  branches) 25,  ooo,  ooo 

2.  Of  the  Deutsche  Bank  with  the  Schlesischer  Bankverein  in  Breslau  (13 

branches).  , • 30,000,000 

3.  Of  the  Dresdner  Bank  with  the  Oberschlesische  Bank  in  Beuthen  (2 

deposit  offices  in  Konigshiitte) 2,  500,  ooo 

II.  In  Rhineland-Westphalia. — Communities  of  interest: 

Capital. 

i    Of  the  Deutsche  Bank  with —  Marks. 

(a)  The  Bergisch-Markische  Bank  in  Elberfeld  (19  branches) ....  75,  ooo.  ooo 

(6)   The  Duisburg-Ruhrorter  Bank  in  Duisburg  (4  branches) 12,  ooo,  ooo 

(c)  The  Bssener  Kreditanstalt  in  Essen   (13   branches  and   4 

agencies) 60,  ooo,  ooo 

(d)  The  Siegener  Bank  fur  Handel  und  Gewerbe  in  Siegen 4,  ooo,  ooo 

(f)   The  Essener  Bankverein  in  Essen  (3  branches) 15.  ooo,  ooo 

Totai!  (30  branches  and  4  agencies) 166,  ooo,  ooo 

2.  Of  the  Disconto-Gesellschaf t W1  with  the  Barmer  Bankverein  in  Bar- 

men (17  branches) 59, 836,  200 

3.  Of  the  Dresdner  Bank  with — 

(a)  The  Markische  Bank  in  Bochum  (9  branches) 9,  ooo,  ooo 

(6)  The   Rheinische  Bank  in  Essen   (formerly  in  Mulheim-on- 

the-Rhine)  (6  branches) 21 ,  ooo,  ooo 

4.  Of  the  A.  Schaaffhausen'scher  Bankverein  wa  in  Cologne  (Rhineland) 

(8  branches)  with 145,  ooo ,  ooo 

(a)  The  Mittelrheinische  Bank  in  Koblenz  (2  branches)  and  its 

community  of  interest: 20,  ooo,  ooo 

The  Miilheimer  Bank  in  Mulheim-on-the-Ruhr  (2  branches) .  .  9,  ooo,  ooo 
(6)  The    Westfalisch-Lippische     Vereinsbank    in    Bielefeld     (4 

branches) 7 ,  ooo ,  ooo 

Total  (16  branches) 181 .  ooo,  ooo 


666 


The     German     Great    Banks 

Thus  in  the  Rhineland- Westphalia  mining  district  alone 
there  were  in  existence  on  December  31,  1908,  beside  a 
great  bank  with  8  branches,  not  fewer  than  n  "con- 
cern" banks  with  a  share  capital  (without  counting 
surplus  funds  and  deposits)  of  291,836,000  marks,  and 
in  addition  79  branches,  4  agencies,  and  i  deposit  office  of 
such  banks,  the  number  of  the  latter  being  constantly  on 
the  increase.  This  organization — as  yet  far  from  com- 
pleted— thus  represents  a  considerable  part  of  the  outfit 
with  which  the  several  groups  of  banks  carry  on  the 
competition  for  the  industrial  connections  which  at  the 
present  day  constitute  their  foremost  interest. 

The  creation  of  permanent  communities  of  interest 
may  be  effected: 

(a)  Through  the  founding  of  subsidiary  companies 
(Tochtergesellschafteri)  or  trust  companies. 

(6)  Through  the  acquisition  of  shares  of  existing  banks; 

(c)  Through  agreement; 

(d)  Through  exchange  of  shares. 

We  will  now  discuss  these  various  kinds  of  communities 
of  interest  in  detail. 

(a)  Through  the  founding  of  subsidiary  companies 
(Tochtergesellschaften)  or  trust  companies.  The  establish- 
ment of  subsidiary  banks  played  a  rather  prominent 
part  in  the  beginning  of  the  second  epoch,  but  is  at 
present  merely  of  historic  interest,  inasmuch  as  all  these 
subsidiary  banks  have  disappeared.  We  have  in  mind 
the  so-called  provincial  banks  of  the  early  seventies, 
to  which  attention  has  recently  been  called  by  Tischert 103 
and  especially  by  Wallich.104  They  were  independent 
creations  of  the  parent  bank,  established  by  it  at  its  own 


667 


National    Monetary     Commission 

home.  In  most  cases  they  proceeded,  immediately  after 
their  foundation,  and  as  a  rule  on  the  basis  of  private 
banking  business  acquired  by  them,  to  open  branches  and 
commandites  in  the  several  states  or  provinces.  However, 
being  established  at  the  home  of  the  parent  bank,  in  con- 
trast with  branches  established  elsewhere,  they  had  to 
limit  their  activity  so  as  not  to  compete  with  the  parent 
institution.  Owing  to  that  fact,  as  well  as  to  the  circum- 
stance that  the  provincial  banks,  even  before  they  them- 
selves had  taken  root,  began  to  set  up  branches  and  com- 
mandites elsewhere,  without  being  able  either  to  sup- 
port them  adequately  by  their  own  means  or  to  super- 
intend them  properly  in  virtue  of  their  own  experience, 
and  also  for  general  economic  considerations,  all  these 
provincial,  branch,  and  central  banks  bore  the  germ  of 
death  within  them  at  their  very  birth.  The  industrial 
relations  of  banks  at  that  time  were  quite  undeveloped, 
while  private  banking  firms  were  for  the  most  part  still  of 
great  importance.  Thus  I  am  unable  to  share  the  view 
that  the  plan  was  "well  devised,"  105  but  in  advance  of  the 
time. 

Four  such  "provincial  discount  companies"  were  estab- 
lished in  Berlin  in  1871  and  1872.  The  largest  of  them 
was  the  Promnzial-Disconto-Gesellschaft  in  Berlin,  founded 
by  the  Disconto-Gesellschaft  with  a  nominal  capital  of 
30,000,000  thalers.  It  soon  set  up  a  large  number  of 
branches  and  commandites,  to  wit,  in  Hanover  (involving 
the  absorption  of  the  banking  firm  M.  J.  FrensdorfT), 
in  Bernburg,  Strassburg,  Hamburg,  Duisburg,  Braun- 
schweig, Hameln,  and  Halle;  also  the  Bergisch-Markische 
Bank  in  Elberfeld  and  the  Aachener  Disconto-Gesellschaft 


668 


The     German     Great    Banks 


in  Aachen  (Aix-la-Chapelle) .  In  the  two  cases  last  men- 
tioned the  parent  bank  retained  an  interest  in  the  form 
of  an  undivided  share  of  500,000  thalers  in  each  case, 
which  is  noteworthy  as  a  special  and  early  case  of  "per- 
manent participation  "  of  one  bank  in  another.  However, 
in  1878  the  Provinzial-Disconto-Gesellschaft  had  to  be 
taken  over  by  the  Disconto-Gesellschaft  at  the  cost  of 
great  sacrifices  and  difficulties,  the  branches  having  pre- 
viously been  given  up  one  by  one. 

The  other  "provincial  banks "  founded  at  the  same  time 
in  Berlin  by  parent  banks  were:  The  Promnzial-Wechsler- 
bank  (founded  by  the  Berliner  Wechslerbank) ,  the  Pro- 
mnzial-Gewerbebank  (founded  by  the  Gewerbebank  H. 
Schuster  &  Co.  in  Berlin),  and  the  Promnzial-Makler- 
Bank  in  Berlin. 

Beginning  with  1872  the  following  were  established: 
The  Suddeutsche  Promnzialbank  in  Stuttgart  (by  the 
Stuttgarter  Bank),  the  Promnzial-Wechsler-Bank  in  Bres- 
lau  (by  private  banking  firms  in  Breslau),  and  the  Allge- 
meine  Deutsche  Filialen-Kreditanstalt  (by  the  Allgemeine 
Deutsche  Kreditanstalt  in  Leipzig) . 

Finally,  the  Deutsche  Unionbank  in  Berlin,  which  itself 
had  to  be  liquidated  as  early  as  1876,  with  the  aid  of  the 
Deutsche  Bank,  founded  a  chain  of  Unionbanks,  beginning 
with  1871,  of  which  only  the  Unionbank  in  Mannheim 
(absorbed  by  the  Pfalzische  Bank  in  1895)  eked  out  a 
somewhat  longer  existence;  while  a  Berlin  banking  firm 
founded  a  number  of  South  German  Zentralbanken  in 
1873  (the  Bayerische  Zentralbank  in  Munich,  the  Badische 
Zentralbank  in  Karlsruhe,  the  Frankische  Zentralbank  in 
Nuremberg,  the  Wurttembergische  Zentralbank  in  Stutt- 


669 


National     Monetary     Commission 

gart,  and  the  Suddeutsche  Zentralbank  in  Frankfort-on- 
the-Main).  All  these,  however,  underwent  liquidation, 
most  of  them  immediately  after  their  foundation. 

As  may  be  seen  by  the  sketch  of  the  development  of  the 
several  great  banks  (Appendix  VII) ,  the  establishment  of 
subsidiary  companies  by  the  banks  never  assumed  large 
proportions  in  Germany,  either  in  the  first  or  in  the  second 
epoch.  On  the  other  hand,  the  establishment  of  German 
"subsidiary  banks"  in  foreign  countries  played  a  rather 
important  part, 'inasmuch  as,  for  reasons  already  set  forth, 
they  proved  to  be  a  business  necessity  for  the  special 
purpose  of  the  development  of  over-sea  trade,  for  which 
the  establishment  of  mere  branches  was  neither  sufficient 
nor  desirable,  at  least  on  a  large  scale,  for  reasons  to  be 
discussed  later. 

Except  for  the  purpose  of  subserving  the  needs  of  over- 
sea trade,  the  relations  to  the  colonies,  or  the  extension  of 
business  relations  with  foreign  countries,106  the  number  of 
"subsidiary  companies"  established  has  never  been  great 
even  in  recent  time  (aside  from  the  above-mentioned  pre- 
mature and  hence  unsuccessful  experiments  of  the  seven- 
ties) .  In  addition  to  two  stock  companies  established  in 
1905  after  the  model  of  the  Deutsche  Treuhandg^sellschaft 
(the  Revisions-  und  Vermogens-Aktiengesellschaft  and  the 
Treuhand  Vereinigung,  Aktiengesellschaft  in  Berlin)  the  fol- 
lowing instances  of  recent  date 107  may  be  enumerated :  The 
establishment,  in  1900,  by  the  A.  Schaaffhaus°n'scher 
Bankverein,  of  the  Westfdlisch-Lippische  Vereinsbank, 
prompted  probably  by  special  personal  and  local  rea- 
sons ;  of  the  Bayerische  Disconto-  und  Wechselbank  in  Nu- 
remberg, in  1905,  by  the  Disconto-Gesellschaft  jointly  with 
the  Bayerische  Hypotheken-  und  Wechselbank;108  of  the 

670 


r 


he     German     Great    B 


a  n 


Bank  fur  Thuringen  normals  B.  M.  Strupp  Aktiengesellschaft 
in  Meiningen,  in  1905,  by  the  Disconto-Gesellschaft  jointly 
with  the  Mitteldeutsche  Kreditbank,  the  B.  M.  Strupp 
Banking  House  and  the  Allgemeine  Deutsche  Kreditbank; 
the  transformation  of  the  private  banking  firm  of  Ludwig 
Peters  Nachfolger  at  Braunschweig  into  the  Braun- 
schweiger  Privatbank  Aktiengesellschaft,  in  1905,  by  the 
Hannoversche  Bank  jointly  with  the  Osnabriicker  Bank 
and  the  Hildesheimer  Bank,  and  the  transformation  of  the 
banking  firm  Perls  &  Co.  in  Breslau  into  the  Schlesische 
Handelsbank  Aktiengesellschaft  in  Breslau,  in  1905,  by 
the  Disconto-Gesellschaft  in  cooperation  with  the  Berliner 
Handelsgesellschaf  t . 

On  the  whole,  practical  experience  has  shown  that 
domestic  subsidiary  companies  possess  almost  exclusively 
the  disadvantages  of  branch  banks  without  their  advan- 
tages. 

Not  only  do  subsidiary  companies  readily  escape  all  in- 
fluence on  their  business  management,  which  may  thus 
adopt  methods  fundamentally  different  from  those  of  the 
parent  bank,  but  they  are  equally  apt  to  rid  themselves 
of  anything  like  thorough  and  permanent  inspection  of 
their  business  activity.  On  the  other  hand,  they  require 
a  permanent  ownership  of  shares,  and  often  make  large 
demands  on  the  parent  bank  for  capital,  especially  in 
critical  times,  which  of  course  is  particularly  inconvenient. 
We  were  able  to  trace  this  process  in  the  history  of  the 
Credit-Mobilier,  whose  collapse  was  largely  brought  about 
in  that  way.109 

These  are  probably  the  main  reasons  why  the  sub- 
sidiary banks  have  hitherto  exercised  far  less  influence, 


671 


National     Monetary     Commission 

within  Germany,  both  on  the  development  of  banking  and 
in  particular  on  the  concentration  movement,  than  the 
trust  companies,  which  have  been  extensively  established 
by  the  great  banks  either  directly  or  with  their  coopera- 
tion, in  the  industrial  field,  especially  in  the  domain  of  the 
electro-technical  industry.     To  discuss  the  nature  and  the 
advantages  and  disadvantages  of  these  trust  companies 
would  be  beyond  the  scope  of  the  present  work.     The 
most  important  trust  companies  in  the  field  of  the  electro- 
technical  industry  are  enumerated  in  notes  98  and  100  on 
page  8 1 1.     They  are  related  to  our  present  subject  only  in 
so  far  as  they  served,  directly  or  indirectly,  to  relieve  the 
banks  of  a  part   of   their   financial  tasks,  especially  as 
regards  the  issue  business;   also  in  so  far  as  they  were 
intended    to     serve    the    needs    of    smaller   enterprises, 
whose    securities    could    not    be    emitted   by   the  banks 
themselves,   the  trust   companies  taking   up   the  securi- 
ties of  these  enterprises  and   utilizing  them   as  a  basis 
of  obligations  to  be  issued,  thus  rendering    them  market- 
able', uo  finally,  in  so  far  as  they  were  employed  to  in- 
crease the  influence  of  the  banks  on  certain  branches  of 
industry  in  the  establishment  or  enlargement  of  industrial 
enterprises,  through  aid  rendered  at  the  time  of  organiza- 
tion and  in  the  sale  of  securities.111 

From  the  nature  of  these  functions  it  is  evident  that  the 
trust  companies  subordinated  to  the  banks  strongly  tended 
to  promote  concentration. 

(b)  Through  acquisition  of  shares.  The  creation  of  per- 
manent connections  through  communities  of  interest  by 
means  of  the  acquisition  of  the  stock  of  existing  banks, 
which  is  going  on  very  extensively,  needs  no  special  discus- 

672 


The     German     Great    Banks 

sion.  Only  one  point  has  to  be  mentioned,  viz.,  that  a  mere 
possession  of  stock  does  not  of  itself  result  in  a  community 
of  interest,  unless  it  is  accompanied  by  other  factors  es- 
tablishing a  close  connection,  which,  in  fact,  in  most  cases 
becomes  the  occasion  for  the  purchase  of  shares.  These 
factors  may  be  (i)  an  agreement  with  the  bank  whose 
shares  have  been  acquired  by  which  that  bank  undertakes 
to  transact  at  least  the  larger  part  of  its  business  with  the 
acquiring  bank,  while  the  latter  guarantees  to  the  former 
the  "  most  favorable  treatment,"  or  (2)  the  appointment  of 
one  or  more  representatives  of  the  acquiring  bank  as  mem- 
bers of  the  supervisory  board  of  the  bank  whose  stock  is 
acquired.112 

So  far  as  I  am  able  to  learn,  these  two  factors  are  for  the 
time  being  absent  from  the  relation  of  the  Disconto-Gesell- 
schaft  to  the  Rheinisch-Westfalische  Disconto-Gesell- 
schaft.113  Accordingly,  reversing  the  views  expressed  in  the 
first  German  edition  of  the  present  work  (p.  188,  No.  3) ,  I  no 
longer  include  that  bank  in  the  group  of  the  Disconto- 
Gesellschaft,  although  the  Disconto-Gesellschaft  is  said  to 
own  shares  of  the  Rheinisch-Westfalische  Disconto-Gesell- 
schaft to  the  amount  of  about  2,000,000  marks.114  On 
the  other  hand,  the  Magdeburger  Bankverein,  having  en- 
tered into  a  closer  relation  with  the  Disconto-Gesellschaft 
by  the  reciprocal  appointment  of  a  representative  of  each 
bank  on  the  supervisory  board  of  the  other,  is  properly 
included  in  the  group  of  the  Disconto-Gesellschaft. 

(c)  Through  agreement.  A  community  of  interest  may 
be  established  by  agreement  between  two  banks,  generally 
about  equal  in  strength,  providing  for  a  pro  rata  division 
of  the  proceeds  resulting  from  the  business  transactions 

90311°— ii 44  673 


National    Monetary     Commission 

of  both.  From  a  purely  theoretic  standpoint,  this  ar- 
rangement certainly  can  accomplish  the  intended  pur- 
poses only  on  condition  that  the  two  contracting  parties 
either  follow  in  the  main  the  same  business  policy  or  are 
mutually  complementary  in  their  business  activity. 

For  a  while  the  typical  example  of  a  community  of  in- 
terest through  agreement  was  the  Dresdner  Bank-Schaaff- 
hausen  combination,  created  by  the  agreement  of  Sep- 
tember 10,  1903.  In  this  case  the  activities  of  the  con- 
tracting parties  were  certainly  complementary,  inasmuch 
as  the  Dresdner  Bank,  at  the  time  of  the  agreement,,  had 
devoted  itself  far  more  extensively  to  the  promotion  of 
foreign  business,  Bourse  transactions,  the  deposit  business 
and  the  issuing  business,  while  the  A.  Schaaffhausen'- 
scher  Bankverein  had  cultivated  intimate  relations  to  in- 
dustry, especially  mining,  and  more  particularly  to  the 
iron  industry  of  Rhineland- Westphalia,  not  only  for  a 
much  longer  period  than  the  Dresdner  Bank,  but  also  to  a 
much  greater  extent  and  with  greater  success.115 

In  this  case,  therefore,  it  may  be  assumed  that  this  com- 
plementary character  of  the  two  banks  was  the  decisive 
factor  that  led  to  the  creation  of  the  community  of  inter- 
est. Evidently  every  such  combination,  with  the  result- 
ing union  of  forces,  intelligence,  enterprise,  and  capital, 
signifies  an  immense  increase  of  power  on  the  part  of  the 
contracting  parties,  whose  organic  union  will  always  mean 
a  far  greater  force  than  the  mere  arithmetic  sum  of  the 
separate  forces. 

However,  as  I  previously  pointed  out,  the  weakness  and 
dangers  of  such  a  community  of  interest  must  not  be  un- 
derestimated. They  are  especially  apt  to  be  felt  in  cases 


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The     German     Great    Banks 

where  there  is  not  a  substantial  equality  of  weight  between 
the  two  scales. 

First  of  all,  a  community,  which  leaves  the  formal 
independence  of  the  contracting  parties  unimpaired,  does 
not  necessarily  lead  to  a  saving  in  the  operating  expenses, 
at  least  not  to  a  large  extent. 

Differences  of  opinion  regarding  the  business  manage- 
ment and  the  common  business  policy  can  hardly  lead  to 
serious  danger,  provided  the  contracting  parties  are  about 
equally  strong;  but  if  one  of  the  parties  has  any  degree 
of  preponderance,  such  differences  may  lead  to  grave 
consequences.  The  weaker  party  in  such  cases  has  gen- 
erally no  other  recourse  but  an  appeal  to  the  committee 
or  council  of  delegates,  consisting  as  a  matter  of  course 
of  members  of  the  two  administrations,  and  hence  apt 
to  decide  in  favor  of  the  stronger  party.  But  even  if 
this  is  not  the  case,  disappointment  is  apt  to  result.118 
The  agreement  being  as  a  rule  made  for  a  long  period, 
such  disappointment  becomes  a  source  of  annoyance. 
Having  gained  an  insight  into  each  other's  business  con- 
duct, the  two  parties  find  it  difficult  to  separate,  even 
when  separation  would  be  the  natural  course,  while 
fusion,  the  opposite  alternative,  is  not  without  its  objec- 
tions. 

Dissatisfaction  of  another  sort  may  arise  from  the  fact 
that  one  of  the  two  parties  may  have  made  poor  profits, 
perhaps  repeatedly,  while  the  other  has  made  good  profits. 
The  latter  thereupon  will  not  be  greatly  pleased  at  the 
prospect  of  having  to  "feed"  its  needy  partner.  Such 
a  situation  may  become  dangerous  if  the  less  successful 
partner,  impressed  by  the  regular  good  results  of  the 


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National    Monetary     Commission 

successful  one,  finds  in  them  not  so  much  a  spur  to  its  own 
ambition  to  attain  equal  success,  as  a  comfortable  in- 
surance of  the  share  which  by  virtue  of  the  agreement 
will  accrue  to  it  in  any  case  from  the  earnings  of  its  partner. 
In  a  word,  one  partner  may  get  into  the  habit  of  letting 
the  other  work  for  him. 

A  still  graver  situation  may  present  itself  if  one  of  the 
parties,  insisting  on  the  mode  of  distribution  established 
on  the  basis  of  the  status  existing  at  the  time  of  signing 
of  the  agreement,  but  which  would  no  longer  be  fair  in 
case  of  the  enlargement  or  extension  of  the  enterprises, 
attempts  to  prevent  the  other  from  an  expansion  which  it 
feels  justified  to  undertake.  This  situation  would  be 
especially  difficult  to  endure  if  the  weaker  partner  should 
try  thus  to  prevent  the  development  of  the  stronger. 

Other  sources  of  dissatisfaction  and  dissension  may 
arise  from  a  difference  of  views  regarding  reserves,  losses, 
etc.  This  may  happen  even  when  there  exists  a  council 
of  delegates  for  the  decision  of  such  questions,  because 
such  a  council  can  only  decide  disputes,  but  not  remove 
the  dissatisfaction. 

It  is  not  to  be  expected  that  there  will  be  many  cases 
in  which  two  enterprises  will  so  happily  complement  each 
other  in  their  business  operations,  or  be  so  nearly  of  equal 
weight,  that  the  danger  here  indicated  will  either  disap- 
pear or  be  greatly  diminished.  Hence  this  form  of  com- 
munity of  interest  is  hardly  likely,  in  my  opinion,  to 
make  much  headway  among  German  banks.117  At  the 
same  time  it  can  not  be  denied  that,  theoretically  at  least, 
this  method  of  eliminating  mutual  competition  through 
the  placing  of  two  institutions  on  a  footing  of  equality 


676 


The     German     Great    Banks 

by  agreement  is  better  than  the  annihilation  of  one  of 
the  two  institutions  through  ruthless  competition. 

(d)  Through  exchange  of  shares.  A  totally  different 
situation  as  shown  by  practical  experience  is  created 
through  a  community  of  interest  resulting  from  exchange 
of  shares,  such  as  was  effected  in  1897  by  the  Deutsche 
Bank,  first  with  the  Bergisch-Markische  Bank  and  the 
Schlesischer  Bankverein. 

Many  such  communities  of  interest  were  established 
in  the  German  banking  world  between  a  large  bank  and 
other  banks,  some  of  them  much  smaller,  in  the  pursuit 
of  definite  aims  of  industrial  policy  on  the  part  of  the  large 
bank.  Thus,  for  example,  in  entering  on  the  community 
of  interests  above  indicated,  the  aim  of  the  Deutsche  Bank 
was  to  gain  a  footing  in  the  most  important  industrial 
districts,  those  of  Rhineland- Westphalia  and  Upper 
Silesia. 

In  entering  on  a  community  of  interest  with  the 
Duisburg-Ruhrorter  Bank,  in  1902,  the  Deutsche  Bank 
was  doubtless  prompted  by  a  consideration  of  the  close 
connection  existing  between  that  bank  and  the  Haniel 
family,  the  owners  of  the  Gute  Hoffnungshiitte  and  the 
Rheinpreussen  mines. 

In  entering  into  a  community  of  interest  in  1904  with 
the  Essener  Bankverein,  the  foremost  aim  of  the  Deutsche 
Bank  was  doubtless  to  form  a  connection  with  Mr.  Carl 
Funke,  the  large  industrial  entrepreneur'  in  Essen,  who 
owns  the  Konig  L,udwig  mines. 

Finally,  in  entering  into  a  community  of  interest  in 
1903  with  the  Mittelrheinische  Bank  in  Koblenz,  the  A. 
Schaaffhausen'scher  Bankverein  was  evidently  prompted 

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National    Monetary     Commission 

by  the  desire  to  get  in  touch  with  the  collier  firm  of 
Spaeter  &  Co.,  founders  of  the  Rombach  Smelting  Works, 
closely  allied  with  the  Mittelrheinische  Bank,  the  fur- 
ther aim  being  to  become  connected  through  that  firm 
also  with  the  Lorraine-Luxemburg  iron  industry.  This 
desire  may  have  been  sharpened  by  the  consideration  that 
Mr.  Hugo  Stinnes,  a  large  entrepreneur,  was  a  member  of 
the  supervisory  board  of  the  Mittelrheinische  Bank. 

It  is  not  difficult  to  explain  the  rapid  spread  of  commu- 
nities of  interest  through  exchange  of  shares. 

First  of  all,  this  kind  of  community  of  interest  among 
banks  either  pursuing  the  same  business  policy  or  supple- 
menting each  other  in  their  business  activity,  especially  in 
their  relations  to  industry,  offers  a  strong  business  attrac- 
tion, which  will  be  all  the  greater  the  higher  the  premium 
on  the  shares  of  the  bank  which  makes  the  offer  of  ex- 
change to  the  shareholders  of  the  banks  to  be  "  annexed," 
the  exchange  rate  being  calculated  for  the  party  making 
the  offer  and  the  party  consenting  to  the  exchange  by  the 
ratio  of  the  market  values  of  the  stock  to  be  exchanged. 
This  ratio  will,  of  course,  be  all  the  more  favorable  for  the 
bank  making  the  offer  the  higher  the  market  value  of  its 
own  shares. 

In  other  respects  a  community  of  interest  through  ex- 
change of  shares  offers  hardly  anything  but  advantages 
for  both  parties. 

While  eliminating  any  competition  that  may  have  ex- 
isted between  the  two  parties,  it  leaves  to  each  complete 
internal  autonomy,  with  freedom  of  movement  and  devel- 
opment, at  the  same  time  securing  singleness  of  manage- 
ment outwardly  from  one  central  point." 


678 


The     German     Great    Banks 

It  enables  the  "concern"  banks  to  concentrate  their 
strength  on  the  district  where  the  roots  of  that  strength  are 
located,  without  "causing  them  to  be  diverted  from  their 
proper  sphere  by  an  establishment  in  the  national  capi- 
tal," 118  and  without  being  obliged  to  engage  in  competition 
in  Berlin  itself,  in  which  their  chances  would  be  all  the 
smaller  the  later  their  entrance  into  the  capital.  It 
affords  to  them  the  advantage  of  connection  with  a 
great  bank,  which  means  not  only  a  strengthening  of  their 
position,  power,  and  influence,  but  a  large  part  of  the  ad- 
vantages possessed  by  the  great  bank  itself.  Finally,  in 
case  of  need,  in  critical  times,  it  assures  to  them  a  strong 
hold,  the  very  existence  of  which  is  apt  to  serve  as  a  sup- 
port of  their  own  arrangements. 

On  the  other  hand,  the  great  bank  also  derives  numerous 
advantages  from  the  combination.  It  extends  the  area  of 
its  power  and  business  activity  and  enlarges  its  knowl- 
edge of  the  situation  of  the  different  branches  of  industry 
and  commerce  through  expert  information  obtained  from 
institutions  situated  or  represented  at  the  locality.  In 
case  of  an  issue  it  has  at  its  disposal  a  wide  market.  It  is 
in  position  to  procure  for  its  customers  greater  advantages 
and  better  information,  and  especially  to  lend  them 
prompter  and  more  extensive  support  in  their  business 
operations.  Finally,  it  is  enabled  to  set  up  a  uniform  pro- 
gram for  its  entire  business  policy,  and  is  able  to  take 
account  of  the  general  economic  interests  better  than 
with  a  smaller  business  scope  or  with  scattered  forces. 

All  of  these  advantages  are  obtained,  both  to  the  largest 
possible  extent  and  in  the  simplest  and  least  risky  manner, 
through  communities  of  interest  established  by  means  of 


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National    Monetary     Commission 

an  exchange  of  shares,  since  the  object  may  be  attained 
even  by  a  relatively  unimportant  ownership  of  shares. 

There  is,  indeed,  some  danger  in  this  case,  too,  that  the 
leading  bank  may  expose  itself  to  excessive  demands  for 
assistance,119  but  this  danger  is  lessened  from  the  very  start 
by  the  fact  that,  by  virtue  of  the  combination,  the  leading 
bank  acquires  greater  and  greater  available  resources 
through  the  amalgamated  banks  and  their  customers. 

B.    IN     AN    INDIRECT     WAY,    BY    MEANS     OF     DECENTRALIZATION     OF    OPERA- 
TIONS. 

i .  Through  the  founding  of  silent  partnerships  (comman- 
dites). — The  number  of  commandites,  which  in  1895  ac- 
cording to  Appendix  VI  was  only  13  for  all  the  great  banks 
together — that  is  to  say,  very  small — dropped  to  1 1  by  the 
end  of  1905,  so  that  there  is  on  an  average  only  i  com- 
mandite  to  each  great  bank. 

The  32  allied  banks  (Konzernbanken)  had  at  the  end 
of  1908  only  1 8  commandites  (Table  10,  p.  1012),  a  still 
lower  average.126 

The  Darmstadter  Bank  possessed  originally  a  very  large 
number  of  commandites  (as  many  as  16),  having  set  up 
one  of  them  in  New  York  as  early  as  1854,  another  in 
Paris  in  1857,  at  the  same  time  planning  others  at  St. 
Petersburg,  London,  Smyrna,  and  Constantinople,  to  foster 
foreign  business.  As  early  as  1856  one  of  its  founders, 
Gust,  von  Mevissen,  planned  nothing  less  than  the  estab- 
lishment of  a  "Central  Bank  for  Foreign  Commandites" 
with  a  capital  of  100,000,000  thalers  (!),  to  the  end  "that 
the  capitals  of  the  various  German  banks — all  of  them 
seeking  to  establish  commandites  abroad — might  no  longer 


680 


The     German     Great    Banks 

be  scattered,  and  that  at  the  same  time  the  ablest  pos- 
sible representation  might  be  secured."121 

In  the  years  of  business  depression  toward  the  end  of 
the  fifties  and  the  early  sixties  the  Darmstadter  Bank  had 
had  a  discouraging  experience  with  the  system  of  branch 
banks  to  which  it  had  at  first  given  the  preference.  Ac- 
cordingly, in  1863  it  abolished  even  its  branch  in  Mainz, 
founded  in  1854,  atld  transformed  it  into  a  commandite, 
"solely  in  order  to  limit  the  number  of  institutions  apt 
to  create  liabilities  for  the  bank  by  their  operations." 

But  while  the  commandite  does  have  this  advantage 
over  the  branch,  that  the  leading  bank  is  not  made  directly 
liable  through  the  business  transactions  of  the  comman- 
dite, yet  the  difference  is  rather  formal,  because  when  a 
commandite  through  bad  management  has  got  into  diffi- 
culties, the  leading  bank  can  not  abandon  it  any  more 
than  it  can  abandon  a  branch.  In  addition,  the  nature 
of  the  commandite  gives  rise  to  dangers  which  do  not 
affect  the  branches,  or  at  any  rate,  not  to  the  same  extent. 

First  of  all,  a  commandite,  like  a  subsidiary  company 
(Tochtergesellschaft) ,  even  though  bound  by  an  agree- 
ment granting  special  rights  of  control  to  the  leading 
bank,  is  more  difficult  to  control  than  a  branch.  More- 
over, it  will  be  all  the  less  willing  to  be  controlled  the 
greater  its  success,  the  justifiable  feeling  of  self-confidence 
on  the  part  of  the  management  leading  it  in  such  cases 
to  resent  any  attempt  at  interference.  Hence  a  com- 
mandite is  more  apt  than  a  branch  to  develop  its  entire 
business  policy  along  lines  at  variance  with  the  leading 
bank,  occasionally  even  in  opposition  to  it. 


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National    Monetary     Commission 

It  is  also  more  apt  to  cause  surprises,  since  the  corn- 
mandite  is  less  disposed  to  submit — all  the  less  the  longer 
it  has  existed — to  binding  instructions,  impeding  its  free 
movement,  for  example,  as  regards  the  amount  of  uncov- 
ered credit,  the  kind  of  security  in  case  of  covered  credits, 
the  amount  of  acceptances,  etc.  We  have  seen  that  by 
reason  of  such  surprises  the  Deutsche  Bank,  among  others, 
had  to  liquidate  with  heavy  loss  its  commandites  in  New 
York  and  Paris  (see  sec.  4) .  Moreover,  such  instructions 
are  apt  to  neutralize  the  advantages  afforded  by  the  very 
autonomy  of  the  management  and  by  its  freedom  to  give 
untrammeled  expression  to  its  individuality  in  business 
matters. 

Furthermore,  while  the  commandite  derives  very  marked 
advantages  in  diverse  directions  from  its  connection 
with  the  leading  bank,  the  advantages  accruing  to  the 
latter  are  often  inconsiderable,  especially  since  the  com- 
mandite, with  its  limited  means,  often  finds  it  difficult  to 
face  the  competition  of  large  banks  in  its  locality.  On 
the  other  hand,  there  is  the  danger  that  the  commandite, 
having  attained  a  certain  importance,  may  terminate  the 
agreement  with  the  leading  bank  and  make  itself  com- 
pletely independent. 

Finally,  in  case  the  manager  of  a  commandite  is  remiss 
or  unsatisfactory  in  the  conduct  of  its  business,  the  leading 
bank  has  no  power  to  interfere,  while  in  the  case  of  a 
branch  bank  such  power  exists  and  is  most  likely  to  be 
exercised. 

If  the  manager  dies,  the  business  will  have  to  be 
liquidated,  which  in  most  cases  is  not  to  the  interest  of  the 
bank,  or,  if  the  agreement  contains  special  provisions  for 

682 


The     German     Great    Bank; 

this  event,  as  is  generally  the  case,  the  bank  may  become 
involved  in  great  difficulties  and  annoyance  until  a  suit- 
able successor  is  chosen.  The  fact  is  that  the  commandite 
is  essentially  bound  up  with  the  person  of  its  manager, 
not  only  in  its  success  but  to  a  large  extent  in  its  very 
existence.122 

Furthermore,  the  advantage  which  the  leading  bank 
might  obtain  through  a  widening  of  its  business  rela- 
tions and  its  industrial  and  commercial  information,  in 
virtue  of  its  connection  with  the  commandite,  is  lessened 
by  the  greater  looseness  of  the  connection  between  the 
commandite  and  the  leading  bank,  as  compared  to  a 
branch  bank,  whose  manager  is  obliged  to  make  periodic 
reports,  etc. 

On  the  other  hand,  it  must  be  acknowledged,  as  an 
advantage  of  the  commandite,  that  in  many  cases  the 
personal  influence  and  reputation  of  the  manager,  com- 
bined with  his  accurate  knowledge  of  the  local  conditions 
and  customers,  secures  to  the  bank  both  a  dignified  rep- 
resentation and  a  satisfactory  income,  even  though  this 
in  most  cases  is  not  high.  The  Darmstadter  Bank,  for 
example,  obtained  7  per  cent  interest  on  its  commandite 
investments  of  153,000,000  marks  between  1875  and  1889, 
during  which  time  the  number  of  its  commandites  fell 
from  1 3  to  9 .  During  the  same  time  its ' '  permanent  partici- 
pations" in  joint-stock  banks,  amounting  to  1,690,000,000 
marks,  yielded  only  6  per  cent  interest.123  During  the 
period  1896-1900  the  returns  from  its  commandites  varied 
between  7^,  10,  8,  10,  and  7Xper  cent,  while  in  1901  and 
1902  they  were  only  4  and  6  per  cent.134 


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National    Monetary     Commission 

That  advantage,  however,  as  we  have  seen,  is  counter- 
balanced by  weaknesses  and  dangers.  Hence  it  is  only 
natural,  as  shown  by  the  figures  above  given,  that  the 
establishment  and  maintenance  of  commandites  tends  to 
become  rare  in  the  German  banking  world. 

2.  Through  the  founding  of  branches. — As  regards  the 
decentralization  of  operations  through  the  creation  of 
branches  (within  Germany),  we  see  from  Appendix  VIII 
that  their  number  in  the  case  of  the  German  great  banks 
at  the  end  of  1908  was  exceedingly  small,  both  absolutely 
and  relatively;  the  total  being  69  for  the  eight  great 
banks  of  Berlin125  (61,  if  we  deduct  the  8  established  in 
the  same  city  where  the  home  offices  of  the  banks  are 
located),  and  (according  to  Table  10  of  the  same  appendix) 
241  for  32  allied  banks  (Konzernbankeri) ,  making  an  aver- 
age of  not  quite  8  branches  to  each  concern  bank . 126  A  sim- 
ilar situation  exists  as  regards  the  other  provincial  banks. 
In  the  provinces  the  number  of  branches,  at  least  so  far  as 
the  absolute  figures  are  concerned,  is  greater  than  in 
Berlin,  but  in  the  latter  case  regard  should  be  had  for  the 
very  large  number  of  deposit  offices. 

On  the  whole,  however,  the  number  of  branches,  at 
least  in  proportion  to  the  number  of  banks  concerned,  is 
not  large. 

This  is  all  the  more  surprising  because  in  almost  all 
foreign  countries,  with  the  exception  of  the  United 
States,127  the  system  of  branch  banks  has  become  enor- 
mously developed.  Thus  Ad.  Weber 128  reports  that  in 
England  and  Wales  as  far  back  as  the  end  of  1899  there 
were  12  banks,  each  of  which  numbered  more  than  100 
branches,  and  which  together  (including  the  main  offices) 


684 


The     German     Great    Banks 

had  2,304  establishments,  while  the  total  number  of  bank- 
ing establishments  in  England  and  Wales  at  the  end  of 
1899  was  4,540  (3,548  in  1876),  of  which  816  were  not 
open  daily  but  only  on  special  days  (for  example,  market 
days) . 

In  1901  there  were  in  ijngland  21  banks  having  more 
than  100  branches  each,  and  the  total  number  of  banking 
establishments  in  the  United  Kingdom  was  6,672,  to  wit, 
4,872  in  England,  1,087  m  Scotland,  690  in  Ireland,  and 
23  on  the  Isle  of  Man,129  of  which,  however,  1,124  were 
not  open  every  day.130  Over  one-fourth  of  all  the  exist- 
ing branches  were  opened  in  the  eight  years  1896-1903, 
1  'so  that  the  president  of  the  London  and  County  Bank 
at  the  general  meeting  in  February,  1902,  was  able  to 
say  that  there  was  almost  no  street  in  London  that  did 
not  have  a  branch  bank,  and  if  things  continued  in  that 
manner,  the  branch  banks  would  by  and  by  exceed  the 
barrooms  in  number."  m  A  single  bank,  the  London  City 
and  Midland  Bank,  had  in  the  beginning  of  1905  as  many 
as  447  branches,  that  is  to  say,  257  branches  more  than 
all  the  Berlin  great  banks,  together  with  the  52  provincial 
banks  affiliated  with  them  at  the  end  of  1904;  on  Decem- 
ber 31,  1907,  according  to  the  Economist,  the  English 
joint-stock  banks,  then  numbering  only  74  (excluding  the 
colonial  and  foreign  banks),  35  of  these  being  authorized 
to  issue  bank  notes,  had  not  less  than  6,809  branches  and 
subbranches. 

The  Lloyd's  Bank  and  the  above-mentioned  London 
City  and  Midland  Bank  have  each  more  than  400  branches, 
the  former,  in  round  numbers,  500  "places  of  business 


685 


National    Monetary     Commissio 


n 


(branches)"  and,  in  round  numbers,  160  " subbranches  and 
agencies,"  making  a  total  of  560  establishments. 

In  France132  the  number  of  agencies  and  branches  in- 
creased in  the  fourteen  years  from  the  end  of  1894  to  tne 
end  of  1908  as  follows: 


Agencies  and  branches. 


18 

34. 

1908. 

Paris 
and 
suburbs. 

Prov- 
inces. 

Paris 
and 
suburbs. 

Prov- 
inces. 

Foreign 

countries, 
including 
Algeria. 

96 

62 

Comptoir  National  d'Escompte  

24 

49 

Societe  generate 

88 

6^7 

Thus  at  the  end  of  1908  these  three  institutions  alone 
had,  together,  199  branches  and  agencies  in  Paris  and 
suburbs,  and  961  branches,  agencies,  and  bureaus  in  the 
provinces. 

In  Scotland133  the  number  of  branches,  as  compared 
with  the  above-mentioned  1,087  in  I9°l  (belonging  to  10 
banks),  was  as  follows:  589  in  1865,  688  in  1872,  912  in 
1873,  1,021  in  1895,  and  1,015  m  1896.  As  early  as  1871 
there  were  in  that  country  branch  banks134  at  283 
places,  including  61  localities  having  less  than  1,000  inhab- 
itants, 70  between  1,000  and  2,000  inhabitants,  35  be- 
tween 2,000  and  3,000  inhabitants,  and  33  between  3,000 
and  4,000  inhabitants.  As  early  as  the  seventies  there 
were  at  Brechin,  which  then  numbered  9,000  inhabitants, 
not  less  than  7  branches  of  different  banks.  This  is  an 
exceedingly  large  number,  even  allowing  for  the  fdctthat 
the  town  includes  the  rural  districts  adjoining. 


686 


The     German     Great    Banks 

At  the  end  of  1908  the  Credito  Italiano  founded  in  Rome 
as  late  as  1895,  with  German  cooperation,  had  already  17 
branches  in  Italy,  and  the  Banca  Commerciale  Italiana,  in 
Milan,  founded  in  1894,  also  with  German  cooperation, 
even  as  many  as  33. 

It  must  not  be  supposed  however,  that  all  these  figures 
may,  without  further  qualification,  be  compared  with 
those  of  Germany,  as  is  often  done,  and  that  they  indicate 
a  more  profound  difference  than  really  exists. 

(a)  As  regards  France,  the  numerous  branch  establish- 
ments existing  in  that  country  are,  in  large  part,135  not  so 
much  branches,  in  the  German  sense,  as  "  agencies,"136 
much  easier  to  establish  and  possessing  far  less  importance 
and  a  far  less  extensive  business  circle  than  the  German 
branches,  some  of  which  occasionally  undertake  operations, 
especially  of  local  scope,  in  which  the  home  office  does 
not  participate. 

(b)  Nor  can  any  direct  comparison  be  made  with  Brit- 
ish conditions.     On  the  one  hand,  as  already  pointed  out, 
many  of  the  banking  offices   enumerated   as   branches, 
especially  in  London,  have  the  character  of  the  German 
deposit  offices  rather  than  that  of  the  German  branches. 
On  the  other  hand,  the  banks  in  Scotland  are  mere  note 
banks,  while  those  in  England  are  partly  note  banks  and 
partly  deposit  banks,  which,  in  founding  branches,  were 
prompted  by  business  reasons,  sometimes  cogent  ones, 
totally  different  from  those  prevailing  in  German  bank- 
ing.    German  banks  either  do  not  carry  on  the  deposit 
business  at  all,  or  only  in  combination  with  a  great  num- 
ber of  other  activities,  among  which  the  deposit  business 
never  occupies  the  foremost  place. 


687 


National    Monetary     Commission 

Now,  the  note  banks,  in  order  to  raise  the  note  circula- 
tion,137 are  positively  forced  to  create  an  ever  denser  net- 
work of  branches,  if  they  are  to  carry  out  their  plans  suc- 
cessfully, while  the  deposit  banks  are  compelled  to  resort 
to  the  same  policy  for  the  purpose  of  attracting  the  funds 
of  wider  and  wider  circles,  especially  of  the  middle  class  and 
small  capitalists  and  tradesmen,  who  are  not  confined  to 
the  great  cities.  We  should  probably  witness  a  similar 
development  in  Germany  if  the  "  central  (einheitliche) 
deposit  bank,"  or  even  several  competing  deposit  banks, 
were  to  become  realities. 

"  Without  the  issuing  power,  the  Scotch  banks  would 
have  been  unable  either  to  establish  so  many  branches  or 
to  extend  so  many  facilities  to  depositors,  and  without 
the  branches  and  the  facilities  granted  they  would  never 
have  had  any  deposits."  138 

(c)  In  Germ-any  there  was  from  the  first  but  little  in- 
clination to  allow  the  advantages  of  central  management 
from  one  point  to  be  weakened  by  the  establishment  of 
branches.  Again,  it  was  largely  feared  that  the  demands 
by  the  branches  on  the  parent  bank  might  easily  become 
excessive,  and  that  they  might  thwart  the  business  policy 
of  the  bank  as  well  as  the  general  disposition  over  its 
resources,  which  must  rest  in  a  single  hand. 

Still  even  in  Germany  it  was  impossible  not  to  recog- 
nize the  advantages  afforded  through  a  decentralization 
of  operations  by  means  of  branches,  including  increase  of 
power  and  greater  resisting  capacity. 

Foremost  among  these  advantages  is  the  close  touch 
which  a  branch  necessarily  gains  little  by  little  with  in- 
dustry and  commerce  within  its  district;  the  accurate 

688 


The     German     Great    Banks 

insight  which  daily  contact  gradually  affords  into  the  needs 
for  credit,  the  habits,  financial  condition,  and  reliability 
of  firms  and  individuals  within  that  district,  so  that  such 
a  branch  is  in  a  position  to  give  the  most  accurate  and 
reliable  information  on  all  these  important  details  to  the 
central  bank.  Moreover,  in  many  cases  the  special  local 
conditions  lead  to  a  widening  of  the  field  of  activity  of  the 
bank  in  that  district;  it  is  found  necessary  or  possible  to 
engage  in  special  lines  of  banking  which  the  bank  had  not 
previously  put  on  its  program,  owing,  perhaps,  to  lack 
of  expert  personnel.  Thus  the  branches  and  their  man- 
agers, as  well  as  the  officials  trained  in  them,  often  form 
a  welcome  addition  to  the  central  administration  of  a 
bank,  its  directors,  and  subordinate  officials. 

Various  means  suggest  themselves  and  are  actually  used 
by  some  banks  by  which  the  advantage  of  the  information 
gained  by  the  central  bank  through  its  branches  may  be 
considerably  increased.  Since  these  branches  are  as  a 
matter  of  course  required  to  submit  periodical  statements 
regarding  their  cash  on  hand,  the  state  of  their  engage- 
ments, their  loans  on  collateral,  debit  and  credit  accounts, 
bills,  acceptances,  etc.,  they  may  readily  be  required,  in 
addition,  to  furnish  to  the  central  bank  written  reports 
on  the  state  of  the  industries  specially  represented  in  their 
district,  and  these  reports  may  thereupon  be  circulated 
among  the  other  branches.  In  addition  to  this,  the  man- 
agers of  the  branches  may  assemble  at  stated  periods — 
say  quarterly — at  the  seat  of  the  home  office,  and  there, 
at  a  meeting  presided  over  by  one  of  the  directors,  make 
verbal  reports  on  the  business  events  that  have  taken 
place  in  their  locality  in  the  interval,  while  on  the  other 

90311° — ii 45  689 


National    Monetary     Commission 

hand  they  may  learn  the  views  of  the  home  office  and  its 
aims  for  the  immediate  future,  as  well  as  its  judgment 
regarding  the  general  economic  situation,  the  branches 
being  thereby  enabled  to  shape  their  business  manage- 
ment accordingly.  The  written  and  oral  reports  will  at 
the  same  time  enable  the  central  office  to  ascertain 
whether,  and  to  what  extent,  the  branches  have  been  too 
partial  in  the  distribution  of  the  credits  granted  by 
them,  or  whether  they  have  exceeded  the  limits  which, 
for  general  or  special  reasons,  are  deemed  advisable,  or 
whether  there  has  been  an  overstretching  of  resources,  to 
be  remedied  by  appropriate  measures,  etc.  All  these  views 
may  at  the  same  time  be  brought  to  the  knowledge  of  all 
the  managers  of  branches. 

The  branches  afford  to  the  central  bank  another  advan- 
tage in  enlarging  its  security  issuing  power,  since  the  cir- 
cle of  customers  for  the  securities  issued  is  often  greatly 
extended  through  the  branches,  while  at  the  same  time 
the  issuing  operations  are  rendered  easier.  The  branches, 
as  a  matter  of  course,  relieve  the  central  bank  of  all  the 
issues  of  merely  local  importance,  such  as  industrial  se- 
curities of  local  enterprises,  or  communal  obligations,  agri- 
cultural and  other  mortgage  bonds,  etc.,  within  the  district 
covered  by  the  branch,  also  of  all  issues  which,  owing  to 
their  insufficient  amount,  do  not  come  up  to  the  require- 
ments for  admission  at  the  bourse,  and  hence  can  not  be 
effected  by  the  central  office  itself  in  its  home  city. 

Again,  the  branches  tend  to  enlarge  the  field  of  invest- 
ment for  the  customers  of  the  bank,  since  a  branch  will, 
as  a  rule,  be  able  to  furnish  to  the  central  office  expert 


69o 


Th  e 


German     Great    Banks 


and  reliable  information,  difficult  to  obtain  otherwise,  con- 
cerning the  intrinsic  value  of  local  securities. 

Furthermore,  the  branches,  possessing  accurate  knowl- 
edge of  the  firms  and  individuals  of  their  district,  their 
financial  status,  the  situation  of  their  business,  etc.,  will, 
as  a  rule,  be  in  position  to  attract  as  deposits  available 
funds,  especially  those  belonging  to  the  small  and  petty 
traders  and  capitalists.  Through  the  collective  activity  of 
its  branches  the  parent  bank  is  thus  also  enabled  to  an 
ever-increasing  extent  to  grant  facilities  to  its  customers 
in  the  matter  of  payment  and  handling  of  bills  and  to  aid 
these  customers  by  valuable  information  and  advice.  The 
central  office  will  also  gain  thereby  a  broader  basis  for 
the  giro,  clearing-house,  and  check  business,  with  decided 
advantage  to  the  public  at  large. 

At  the  same  time  the  variety  of  the  business  activity  of 
its  branches  is  a  kind  of  insurance  to  the  parent  bank 
against  losses  which  it  might  suffer,  either  in  its  own  busi- 
ness or  in  that  of  any  of  its  branches,  since  these  losses 
may  be  more  easily  compensated  by  the  larger  profits  of 
other  branches  during  the  same  period. 

According  to  the  table  prepared  by  Ernst  Loeb  139  the 
collective  turnover  of  the  branches  of  the  Deutsche  Bank 
in  the  years  1896-1902  was  somewhat  larger  than  the  total 
turnover  of  the  central  office,  their  cash  account  was  con- 
siderably higher,  the  bill  and  current  accounts  were  about 
the  same,  while  the  acceptance  account,  owing,  no  doubt, 
to  the  over-sea  business  carried  on  by  the  central  office, 
was  only  from  one-third  to  one-fifth  of  the  acceptance 
account  of  the  central  office. 


691 


National    Monetary     Commission 

During  those  years  the  deposits  of  the  Deutsche  Bank 
were  distributed  as  follows : 


[Amounts  expressed  in  millions  of  marks.] 


Year. 

Central 
office. 

Branches. 

Total. 

x896                 

66  o 

26  6 

92  6 

1807 

7"?    6 

26  i 

!8g8                                                      .                

1899             

114.  5 

41  .  o 

155  5 

138   2 

149-9 

64  6 

157.  8 

55.  i 

213.5 

However,  these  advantages  are  offset  by  a  number  of 
disadvantages,  some  of  them  quite  grave. 

First  of  all,  the  carrying  out  of  a  general  business  policy 
of  the  bank  will,  of  course,  be  more  difficult  the  greater  the 
number  of  its  branches,  since  each  branch  has  to  receive 
special  instructions,  according  to  the  kind  and  extent  of 
its  business  and  the  special  aims  which  it  pursues  in  view 
of  the  special  conditions  of  its  district.  To  reduce  the 
whole  system  to  one  scheme  by  means  of  general  instruc- 
tions to  be  observed  by  each  branch  is  in  most  cases  im- 
practicable, except  as  regards  certain  rules  deduced  from 
experience,  as,  for  example,  that  second  mortgages  or  mort- 
gages on  unimproved  real  estate  (Terrainhypothekeri)  or 
special  kinds  of  paper,  or  unlisted  securities  shall  not  be 
accepted  as  security  for  credit,  or  only  under  certain  con- 
ditions, or  not  without  additional  security.  General  in- 
structions for  this  purpose  not  accurately  adapted  to  the 
individual  case  would  be  habitually  disregarded,  and  hence 
had  better  not  be  issued.  But  even  carefully  devised 
instructions  will  be  of  use  only  in  the  hands  of  intelligent 


692 


The     German     Great    Banks 

branch  managers.  Even  then  they  may  fall  short  in  two 
ways: 

They  may  be  too  strict,  leaving  too  little  room  for  the 
independent  action  of  the  manager  and  compelling  him  in 
any  matter  of  importance  to  consult  the  board  of  directors. 
In  such  case  the  initiative  of  the  manager  is  paralyzed,  he 
is  converted  into  an  automaton,  or  he  loses  the  very  spirit 
by  which  he  should  be  constantly  animated,  namely,  that 
of  personal  responsibility. 

Or  the  instructions  may  be  too  loose  and  too  mild,  in 
which  case  they  may  readily  add  to  the  centrifugal 
tendency  which  is  inherent  in  the  branches  in  any  case. 
Unchecked  by  clear  and  definite  directions,  the  branches 
may  take  little  interest  in  the  general  business  and  admin- 
istrative policy  of  the  bank;  they  may  regard  themselves 
as  entirely  detached  and  independent,  and  not  as  members 
of  a  single  organism,  all  of  which  may  lead  to  grave  con- 
sequences. 

As  regards  the  supervision,  the  theoretical  aim  is  to 
forestall  every  surprise  and  to  discover  any  defect  in 
time  to  apply  a  remedy.  The  law  in  article  246  of  the 
Commercial  Code .  (Handelsgesetzbiich)  even  imposes  this 
task  on  the  members  of  the  supervisory  board  in  the  words : 
"To  superintend  the  management  of  the  business  in  all  its 
branches."  This  task  presents  great  difficulties  both  for 
the  board  of  directors,  located  at  a  distance  from  the 
branches,  and  for  the  permanent  inspectors  appointed  by 
it.  It  necessarily  becomes  more  and  more  difficult  and 
complicated  the  more  the  branches  grow  in  number  and 
in  the  extent  of  their  business  activity.  Hence  it  becomes 
of  special  interest  to  learn  how  in  England  a  bank  with 


693 


National    Monetary     Commission 

some  400  branches  is  able  to  solve  this  question  always  in 
a  perfectly  satisfactory  manner,140  since,  in  view  of  the  ex- 
treme conscientiousness  and  integrity  of  English  business 
men,  it  may  be  assumed  as  certain  that  they  devote  the 
most  scrupulous  care  to  this  subject.  This  is  all  the  more 
noteworthy  in  view  of  the  fact  that  in  England  the  law 
imposes  on  the  board  of  directors  hardly  any  duty  "of 
using  the  proper  diligence,"  it  being  even  questioned 
whether  the  directors  are  liable  for  "gross  negligence," 
that  is  to  say,  for  a  degree  of  negligence  known  to  English 
law,  which  is  even  higher  than  our  " lata  culpa"  (culpable 
negligence)  ,141 

Another  disadvantage,  to  wit,  the  more  or  less  long  time 
of  waiting  before  the  branch  has  been  permanently  estab- 
lished on  a  paying  basis,  has  already  been  pointed  out. 
Especially  in  those  cases  where  the  branch  has  been  estab- 
lished without  being  grafted  on  a  previously  existing  busi- 
ness, it  will  generally  be  a  good  while  (aside  from  excep- 
tional cases)  before  it  is  able  to  stand  on  its  own  feet,  and 
to  become  a  creditor  of  the  parent  bank,  instead  of  being 
its  debtor,  as  is  generally  the  case,  to  very  large  amounts. 
Still  longer  will  be  the  time  before  it  yields  an  adequate 
return.  The  expenses  of  operation142  as  a  rule  are  very 
considerable  from  the  start,  and  in  many  cases  are 
greatly  increased  by  the  acquisition  of  buildings,  which  the 
branch,  for  the  sake  of  competition,  if  for  no  other  reason, 
endeavors  to  erect  either  at  once  or  as  soon  as  possible. 

In  most  cases  also,  at  least  in  the  beginning,  the  capital 
which  the  bank  is  obliged  to  invest  in  its  branches  is  very 
large.  In  fact  it  often  requires  an  increase  of  the  share 
capital.  The  table  drawn  up  by  Ernst  I^oeb143  shows 


694 


The     German     Great    Banks 

that  the  Deutsche  Bank,  for  example,  at  the  end  of  1902 
had  invested  not  less  than  40  per  cent  of  its  capital  in  its 
branches. 

Finally,  by  reason  of  the  legal  requirement  of  recording 
and  the  official  publication  of  the  record,  a  branch  whose 
establishment  proves  to  have  been  a  mistake  can  not  be 
transferred  or  abolished  with  nearly  the  same  ease  as  an 
agency  or  deposit  office. 

Most  of  these  disadvantages,  however,  existed  also  in 
foreign  countries,  where  nevertheless  the  development  of 
the  branch  system  has  been  very  great.  Hence  they 
would  hardly  suffice  to  explain  the  slight  development  of 
branches  in  Germany,  especially  since  those  disadvan- 
tages, as  we  have  seen,  are  offset  by  important  advantages. 

In  view  of  the  pronounced  tendency  toward  concen- 
tration, manifested  in  other  directions,  it  seems  to  me  that 
the  slow  development  of  branches  in  Germany  can  only 
be  explained  as  follows: 

First  of  all,  owing  to  the  importance  and  urgency  of 
the  tasks  which  the  German  banks  had  to  accomplish 
during  that  epoch  in  very  brief  time,  the  development  of 
their  internal  organization  was  somewhat  retarded. 

In  the  next  place,  up  to  the  nineties,  a  large  proportion 
of  the  German  banks,  as  shown  by  the  entire  attitude  of 
various  great  banks  at  that  time,  felt  little  inclined,  as  a 
matter  of  principle,  to  favor  the  concentration  move- 
ment through  decentralization  of  operations,  except  as 
regards  the  establishment  of  deposit  offices  at  the  locality 
of  the  main  office,  where  they  could  be  more  easily  super- 
vised 


695 


National    Monetary     Commission 

Finally,  as  regards  the  time  after  1897,  the  method  of 
communities  of  interest  offered  a  means  of  concentration 
by  which  the  objects  of  a  system  of  branches  could  be 
attained  both  more  fully  and  simply,  and  with  less  capital, 
expense,  and  risk. 

However,  since  the  development  of  communities  of 
interest  will  within  measurable  time  attain  its  natural 
limits,  while  the  tendency  toward  concentration  is  sure 
to  continue,  it  seems  to  me  beyond  doubt  that  in  Germany 
too,  we  shall  witness  a  larger  development  of  the  branch 
system  as  soon  as  those  limits  shall  have  been  attained,  if 
not  before. 

3.  Indirect  concentration  through  the  founding  of 
agencies. — As  regards  the  decentralization  of  operations 
through  agencies,  there  can  be  no  doubt  that  in  Germany 
these  would  be  the  best  form  for  an  extensive  development 
of  banking  organs.  An  agency  is  the  easiest  form  to  set 
up,  and  since,  unlike  a  branch,  it  need  not  be  recorded — in 
fact,  can  not  be  legally  recorded — it  can  with  the  same  ease 
be  abolished  or  transferred.  It  requires  a  much  smaller 
personnel,  and  in  other  ways  involves  smaller  running 
expenses,  since  it  is  less  prominent  outwardly  than  a 
branch; 144  but  the  fact  that  an  agency,  unlike  a  branch, 
can  not  be  recorded  in  the  commercial  register  as  such, 
leads  to  important  consequences,  the  first  being  this — 
that  the  legal  representation  of  the  agency  can  not  be 
effected  according  to  the  principles  prevailing  in  bank 
by-laws  and  banking  practice,  but  only  in  a  roundabout 
and  laborious  way.  One  difficulty  that  is  particularly  irk- 
some is  this — that,  for  the  same  formal  reason,  the  agency 
is  not  recognized  as  such  by  the  very  authorities  with 


696 


The     German     Great    Banks 

which  it  has  to  deal  every  day.  The  Reichsbank  does  not 
admit  the  agency  as  such  to  the  giro  transactions;  the 
post-office  delivers  no  letters  and  other  mail,  and  espe- 
cially no  valuable  matter,  to  the  agency.  This  attitude 
on  the  part  of  the  Reichsbank  involves  considerable  loss 
of  interest  through  the  shipment  of  cash  to  and  fro,  while 
the  attitude  of  the  post-office  compels  the  bank  to  appoint 
special  representatives,  who  can  only  represent  the  bank, 
not  the  agency. 

Thus  the  establishment  of  agencies  as  local  offices  of 
banks  is  unfortunately  subject  in  Germany  to  very  great 
and  regrettable  difficulties.  From  the  considerable  num- 
ber of  " agencies"  which  are  actually  maintained  by  pro- 
vincial banks,  and  which,  according  to  Appendix  VIII, 
amount  to  325  in  the  case  of  the  32  amalgamated  banks 
alone,  one  might  be  tempted  to  infer  that  these  agencies 
had  after  all  made  themselves  at  home  in  the  provinces, 
and  that  thus  the  means  had  been  found  to  attain  through 
" agencies"  what  it  was  found  impossible  or  inadvisable 
to  attain  by  means  of  branches.  This  inference  would  be 
a  grave  mistake.  Of  the  325  agencies  of  the  amalgamated 
banks,  not  fewer  than  287,  according  to  Appendix  VIII, 
are  found  in  Mecklenburg  and  adjoining  districts  (Neuvor- 
pommern  and  Oldenburg) ,  where  peculiar  conditions  pre- 
vail.145 The  so-called  agencies  in  these  districts  are 
agencies  only  in  name,  if  by  that  name  we  denote  inde- 
pendent banking  establishments  (Bankniederlassungeri). 
In  reality  the  agents  in  these  cases  are  either  independent 
merchants,  engaged  also  in  other  lines  of  business,  or,  in 
accordance  with  local  customs,  retired  mayors  and  lawyers 
or  other  prominent  or  reliable  persons,  who  perform  the 


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National     Monetary     Commission 

functions  of  bank  agents  as  a  side  issue.  In  some  cases, 
when  they  are  registered  as  merchants,  they  add  to  their 

firm  name  the  designation :  "  Agency  of  the Bank," 

in  order  to  characterize  their  business,  in  accordance  with 
article  18,  section  2,  clause  2  of  the  Commercial  Code. 

These  agents,  of  course,  act  only  under  a  limited 
authority,  extending,  first  and  foremost,  to  the  receiving 
of  money  and  securities  and  possibly  to  a  limited  number 
of  incidental  operations.  Such  authority  can  be  given 
only  in  case  the  bank  has  at  its  disposal  in  the  districts 
in  question  a  number  of  absolutely  reliable  persons,  and 
when,  moreover,  in  view  of  the  restricted  and  easily  sur- 
veyed field  of  operations,  such  objections  as  may  exist  can 
not  become  very  grave.  For  in  such  cases  the  bank  faces 
a  peculiar  dilemma.  Either  the  agent,  who  is  not  one  of 
the  regular  employees  of  the  bank,  has  to  be  authorized, 
contrary  to  the  usual  banking  practice,  to  receipt  in  the 
name  of  the  bank  for  deposits  intrusted  to  him,146  in 
which  case  the  bank  runs  the  risk  of  not  receiving  the  sums 
thus  deposited  or  not  receiving  them  in  time,  or  this 
authority  is  not  given,  the  bank  or  one  of  its  branches,  to 
which  the  agency  is  subordinated,  reserving  the  right  to 
receipt  for  the  sums  deposited  with  the  agency.  In  such 
case  the  public  will  hesitate  to  confide  large  amounts  to 
the  agency,  and  no  great  custom  can  be  developed. 

All  these  conditions  arise  from  local  needs  and  usages 
and  can  only  be  understood  by  reference  to  them.  They 
are  in  fact  practically  confined  to  Mecklenburg,  Olden- 
burg, and  adjoining  districts  and  can  not  be  transferred 
to  larger  areas. 


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The     German     Great    Banks 


4.  Indirect  concentration  through  the  founding  of  deposit 
offices. — We  have  thus  arrived  at  the  last  form  which 
the  movement  of  decentralization  has  assumed  in  Ger- 
many, to  wit,  the  creation  of  deposit  offices — that  is  to 
say,  establishments  which  conduct  all  kinds  of  banking 
business,  with  the  exception  of  the  issue  business  and 
the  purchase  and  sale  of  their  own  securities.  The 
managers  of  such  offices  receive  an  authorization  which, 
as  a  rule,  is  displayed  in  the  office.  By  this  authoriza- 
tion the  manager  is  usually  empowered  to  perform  such 
functions  and  to  make  such  declarations  in  the  name 
of  the  bank  as  are  involved  in  the  regular  operations  of 
a  deposit  office  (and  exchange  office). 

In  Germany,  as  elsewhere,  the  establishment  of  de- 
posit offices  with  any  prospect  of  success  was  only  pos- 
sible at  a  time  when  the  accumulation  of  capital  had 
already  assumed  certain  proportions. 

According  to  Appendix  VIII,  the  number  of  deposit 
offices  of  the  Berlin  great  banks  was  only  27  at  the  end 
of  1896.  In  1897  the  bourse  law,  which  accelerated  the 
movement  of  concentration,  became  effective,  and  from 
that  year  to  1900  the  number  of  deposit  offices  rose  to  53, 
and  thus  almost  doubled. 

Between  1900  and  1902  the  increase  was  even  greater. 
While  in  1896  the  number  of  deposit  offices  was  only 
27,  in  1902  it  was  87,  having  thus  more  than  trebled. 
It  continued  to  rise,  though  less  rapidly,  to  the  end  of 
1908,  when  it  amounted  to  264,  so  that  from  1896  to  the 
end  of  1908  the  number  of  (domestic)  deposit  offices  of 
the  great  banks  multiplied  almost  elevenfold. 


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National    Monetary     Commission 

On  the  other  hand,  according  to  Table  10  of  Appendix 
VIII,  the  number  of  deposit  offices  of  the  32  amalgamated 
banks  at  the  end  of  1908  was  only  102,  being  thus  quite 
insignificant,  both  absolutely  and  relatively. 

We  have  repeatedly  discussed  the  economic  and 
commercial  advantages  afforded  by  the  deposit  offices. 
One  prominent  advantage  consists  in  the  opportunity 
afforded  to  the  smaller  and  smallest  capitalist  and 
trader  for  the  productive  investment  of  their  savings, 
even  of  the  smallest  amounts.  This  very  opportunity 
constitutes  a  strong  inducement  to  the  accumulation  of 
cash  and  of  surplus,  which  can  thus  be  made  produc- 
tive. Moreover,  the  bank  in  this  way  assists  them  in 
keeping  a  proper  cash  account,  which  otherwise  might 
be  quite  irregular.  The  bank,  on  the  other  hand,  is 
thus  enabled,  within  certain  limits  and  under  certain 
restrictions,  to  utilize  these  deposits  within  the  limits 
of  the  current  account  business ; 147  to  profit  by  a 
constantly  growing  circle  of  customers  whose  habits, 
integrity,  and  financial  condition  it  learns  to  know  quite 
fully.  In  this  way  it  is  enabled  to  find  a  market  for 
its  securities — that  is  to  say,  to  reinforce  its  issuing 
power.  It  will  also  be  enabled,  through  this  circle  of 
customers,  to  extend  the  check,  giro,  and  clearing  busi- 
ness— that  is  to  say,  to  facilitate  payments  and  dimin- 
ish the  need  of  cash  circulation,  thereby  rendering  a 
service  to  the  public  at  large  and  contributing  to  the 
better  development  of  credit.  Finally,  mention  must 
be  made  of  the  other  advantages  pointed  out  by 
Conrad148  and  others.149  "  Through  the  activity  of  the 
bank,  the  deposit  .is  made  to  perform  several  economic 


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The     German     Great    Banks 

tasks  at  one  and  the  same  time.  The  same  sum  which 
the  customer  has  entrusted  to  the  bank  may  be  used 
by  him  for  business  purposes,  the  manufacturer  being 
able  to  make  contracts,  the  merchant  to  order  goods, 
etc.,  on  the  strength  of  his  bank  balance;  the  banker 
uses  the  money  for  his  own  purposes,  granting  a  loan 
to  a  customer.  This  customer  again — say,  a  manufac- 
turer— uses  the  loan  to  pay  his  workmen,  who  in  turn 
use  it  to  make  purchases;  and  all  these  transactions 
take  place  during  the  intervening  few  weeks  while  the 
deposit  remains  at  the  bank.  Thus  the  same  sum  has 
performed  several  economic  functions  at  the  same  time 
and  in  so  doing  has  rendered  to  the  public  several  times 
the  amount  of  service  that  it  could  have  done  without 
the  intervention  of  the  bank.  Herein  lies  the  main 
advantage  of  the  banks  for  the  money  circulation,  an 
advantage  which  is  not  sufficiently  appreciated." 

For  the  present  the  number  of  deposit  offices  as  a 
general  thing  is  still  rather  insignificant,  not  only  in 
the  case  of  the  32  amalgamated  banks,  which  at  the 
end  of  1908  had  only  102  such  offices,  but  also  in  the 
case  of  the  other  provincial  banks;  but  it  can  hardly 
be  doubted  that  it  will  greatly  increase.  It  is  also 
entirely  probable  that  the  number  of  deposit  offices 
of  the  Berlin  great  banks,  which  even  now  is  quite  con- 
siderable (264  at  the  end  of  1908),  will  be  multiplied 
both  in  Berlin  and  elsewhere.  Even  now  there  are 
streets  in  Berlin  which,  as  regards  the  deposit  offices 
of  the  several  banks,  fully  answer  the  description  given 
of  the  conditions  in  L,ondon:  "In  one  of  the  London 
suburbs  there  are  on  a  single  street,  within  a  radius  of 


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National    Monetary     Commissio 


n 


ten  minutes'  walk,  seven  branches,  and  three  more  on 
an  adjoining  street."  15°  In  fact,  in  Berlin  the  radius  of 
ten  minutes'  walk  would  have  to  be  shortened. 

Soon  the  time  will  come  when  the  array  of  deposit 
offices  in  Berlin  will  vividly  recall  the  picture  drawn  of 
the  region  between  Duisburg  and  Dortmund  as  an  illus- 
tration of  industrial  concentration:  " Shaft  follows  shaft; 
furnace  crowds  on  furnace."  151 


702 


PART  V.  THE  MUTUAL  INFLUENCE  OF  CONCEN- 
TRATION IN  BANKING  AND  IN  INDUSTRY. 

I.  INDUSTRIAL  CONCENTRATION  AND  ITS  PRINCIPAL 
CAUSES. 

As  the  present  book  is  not  exclusively  devoted  to  a 
study  of  the  development  of  concentration,  the  question 
whether  concentration  of  banking  has  been  influenced  by 
concentration  in  industry,  and  vice  versa,  can  only  be 
discussed  in  outline. 

i .  The  beginning  of  the  tendency  toward  concentration 
in  industry  is  necessarily  coincident  with  the  moment  at 
which  domestic  industry  is  replaced  by  what  is  called 
town  industry — production  for  one's  own  use  by  produc- 
tion for  customers,  where  the  product  of  labor  is  no  longer 
intended  exclusively  for  the  consumption  of  the  worker 
and  his  family,  but  also  to  satisfy  the  needs  of  others. 
The  demand  for  this  product  begins  forthwith  to  create 
the  laws  of  production.  At  that  moment  begins  the 
necessity  of  division  of  labor.  With  increasing  uniformity 
of  demand  and  increasing  concentration  of  requirements 
there  arises  also  the  necessity  of  extending  the  volume  of 
production  and  concentrating  the  producing  units. 

The  increase  of  the  volume  of  production  becomes 
necessary  also  by  reason  of  the  knowledge,  gradually 
gained,  that  production  becomes  profitable  only  after  it 
has  reached  a  certain  amount.  The  profitableness  of  pro- 
duction depends,  among  other  things,  on  the  greatest 

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National    Monetary     Commission 

possible  diminution  of  the  cost  of  operation,  which,  in 
industry  at  least,  as  a  rule,  diminishes  in  proportion  to 
the  increasing  size  of  the  establishment.  Now,  the  possi- 
bility of  development  of  production  with  simultaneous 
increase  of  profit  and  relative  diminution  of  cost  of 
operation  depends  largely  on  the  centralization  of  opera- 
tions and  of  management. 
;  Such  centralization  may  be  attained  in  various  ways: 

(a)  By  concentrating  the  industry  as  much  as  possible 
in  certain  localities  (districts,  towns)  with  a  numerous 
trained  and  cheap  labor  force  or  with  available  water 
power  and  other  advantages,  such  as  convenient,  rapid,  and 
cheap  transportation  of  raw  material  and  of  industrial 
products  by  water  or  land,  etc. 

t  (6)  Through  the  combination  of  establishments,1  which 
is  effected — 

|  (i)  Through  the  union  of  an  establishment  with  other 
establishments  engaged  in  operations  preceding  or  follow- 
ing in  the  process  of  production,  one  of  them  furnishing 
the  raw  material,  while  the  other  works  it  up.  This  is 
the  combination  of  several  stages  of  production.  In 
this  way  coal  mines  are  combined  with  furnaces,  steel 
works  with  furnaces,  machine  factories  with  rolling  mills — 
that  is  to  say,  establishments  which  depend  on  each  other 
for  the  supply  of  raw  material,  such  as  ore  and  coal,  or 
establishments  which  depend  on  each  other  as  regards 
the  finishing  of  the  products,  such  as  pig  iron,  wrought 
iron,  blooms,  rolled  wire,  etc. 

(2)  Through  the  union  of  several  plants  working  side 
by  side. 


704 


The     German     Great     Banks 

(3)  Through  the  union  of  related  plants  or  of  such  as 
bear  toward  each  other  the  character  of  auxiliaries. 

Such  cases  occur,  for  example,  when  iron  furnaces 
combine  with  coal  mines  into  "furnace-mines"  or  when 
coal  mines  unite  with  iron  furnaces  into  "  mine-furnaces." 
According  to  the  German  cartel  inquiry,  there  were 
4,962  plants  in  the  German  iron  industry  alone  that 
had  entered  into  such  combinations  up  to  1905,  com- 
prising 1 8  branches  of  production.  Of  these  4,962  com- 
bined plants,  12  united  with  10  others,  23  with  n 
others,  and  29  with  12  others.2  The  advantages  of 
such  combinations,  from  the  standpoint  of  operating 
technique,  consists  in  this — that  the  several  operations 
come  under  one  management,  which  sees  to  it  that 
the  different  plants  shall  work  hand  in  hand  and  act 
as  mutual  checks,  so  that,  for  example,  the  finishing 
plant  shall  receive  from  the  other  plants  material  of  only 
such  grade  and  composition  as  it  needs  for  its  special 
purposes,  while  poor  material  and  waste  may  easily 
find  use  in  the  original  plant.  There  is  also  an  opportunity 
for  a  better  division  of  labor  or,  conversely,  a  more 
rational  combination  of  labor.  The  economic  advantages 
consist,  in  the  main,  at  least  in  most  cases,  in  a  dimi- 
nution of  the  general  expenses  of  operation,  of  the  cost 
of  raw  material,  of  freight  rates,  etc.,  also  in  a  kind  of 
insurance,  since  one  branch  can  make  a  profit  while  the 
other  is  losing,  and  diversified  production  may  com- 
pensate for  an  unfavorable  market  condition  in  one 
branch  by  a  favorable  one  in  another,  while  the  complete 
stoppage  of  an  individual  plant,  which  is  apt  to  be 
hurtful,  both  technically  and  economically,  can  more 

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National    Monetary     Commission 

easily  be  avoided.  Again,  in  mixed  works,  barring 
provisions  to  the  contrary  in  the  cartel  contracts,  the 
production  and  sales  in  one  branch — that  is  to  say,  one 
stage  of  production — may  be  enlarged  in  critical  times, 
while  that  in  another  branch  is  curtailed. 

The  advantages  of  such  combinations  are  further 
enhanced  when  the  different  plants  are  also  concentrated 
locally,  "so  that  a  combination  of  enterprises  is  joined 
to  a  combination  of  operations."3  This,  however,  is 
not  usually  the  case. 

A  combination  of  operations  may  also  be  effected — 

(c)  Through  other  modes  of  concentration,  as,  for  ex- 
ample, through  the  complete  union  of  several  enterprises, 
even  though  of  different  nature,  by  way  of  fusion,  or 
through  the  establishment  of  a  community  of  interest,  or 
through  the  purchase  of  the  stock  of  another  enterprise, 
or  through  the  making  of  contracts  excluding  competition 
or  aiming  at  the  delivery  of  coal  or  ore,  etc.  on  preferen- 
tial terms,  etc.,  or,  finally,  through  a  combination  of  mere 
operation  in  conjunction  with  fusion-  or  community-of- 
interest  agreements. 

All  these  cases  may  be  illustrated  by  an  abundance  of 
examples.  I  will  only  cite  a  few  of  the  more  recent  ones.4 

Among  fusions  may  be  mentioned:  The  Hoesch  Iron 
and  Steel  Works  with  the  Westfalia  mines ;  the  Rheinische 
Stahlwerke  with  the  Zentrum  mines;  the  Eschweil  Roll- 
ing Mills  with  the  Ehrenfeld  Tube  Works;  the  Phoenix 
Mining  and  Smelting  Stock  Company  with  the  Nordstern 
coal  mines  (1907);  the  Bismarckhutte  with  the  Bethlen 
Falva  Iron  and  Steel  Works  (1906) ;  the  German-Austrian 
Mannesmann  Tube  Works  with  the  Saarbriicken  Cast 


706 


German     Great    Banks 


Steel  Works.  Under  this  head  come  also  the  purchase  of 
stock  in  the  machine  factories  of  Escher,  Wyss  &  Co. 
in  Zurich  by  the  Felten  &  Guilleaume-I^ahmeyer  Works 
Stock  Company  (1906) ;  and  the  acquisition  of  the  Upper 
Suabian  Cement  Works  Stock  Company  by  the  Stutt- 
garter  Immobilen-  &  Baugeschdft  (1906).  Other  com- 
binations were  the  acquisition  of  the  Henrichshutte  with 
rolling  works  and  furnaces  by  the  locomotive  factory  of 
Hendschel  &  Son  in  Kassel  (1904),  the  community  of 
interest  of  the  Upper  Silesian  Railway  Operation  Stock 
Company  with  the  firm  Steffens  &  Nolle  in  Berlin,  and 
the  community  of  interest  of  the  Berlin-Anhalt  Machine 
Construction  Stock  Company  with  the  Stettin  Fireproof 
Tile  Factory  Stock  Company,  formerly  Didier,  etc. 

The  following  cases  of  most  recent  occurrence  are  of 
special  interest  because  of  the  motives  that  prompted  the 
combinations. 

The  acquisition  of  the  Huldschinsky  Smelting  Works 
Stock  Company  by  the  Upper  Silesian  Railway  Supply 
Stock  Company  by  way  of  fusion,  which  took  place  in  1905, 
was  mainly  prompted  by  the  fact  that  in  this  way  the 
works  of  the  former  company  received  a  welcome  com- 
plement in  the  shape  of  raw  material  and  half-finished 
products  which  they  had  till  then  lacked,  while  the 
absorbing  company  was  thereby  enabled  through  ex- 
change of  labor  to  systematize  and  extend  its  operations. 

The  fusion  of  the  Phoenix  Mining  and  Smelting  Stock 
Company  in  Ruhrort  with  the  Hoerder  Mining  and  Smelt- 
ing Company,  that  is  to  say,  two  works  of  quite  the  same 
nature,  was  mainly  prompted  by  the  fact  that  the  two 
works,  notwithstanding  their  great  size,  were  incomplete 


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National    Monetary     Commission 

in  certain  ways,  which  were  to  be  remedied  by  fusion. 
In  the  case  of  the  Phoenix,  the  incompleteness  consisted 
in  an  insufficient  crude  steel  production,  in  the  case  of 
the  Hoerder  Union — in  an  insufficient  production  of  its 
own  coal,  especially  of  coal  suitable  for  coking.  After 
the  fusion,  each  was  enabled  to  furnish  to  the  other 
that  which  before  they  could  only  acquire  by  outside 
purchase.  Now  they  obtained  these  articles  in  such 
quantity  and  of  such  quality  as  needed,  a  point  which 
is  of  special  importance. 

In  this  case,  therefore,  the  fusion  was  effected  for  tech- 
nical reasons,  despite  the  fact  that  the  two  works  were  far 
apart  geographically,  one  being  located  on  the  extreme 
western,  the  other  on  the  eastern  border  of  the  Rhenish- 
Westphalian  industrial  region.  Similarly,  the  commu- 
nity of  interest  effected  in  the  chemical  industry  be- 
tween the  Hoechst  Dye  Works,  formerly  Meister,  Lucius  & 
Briining  at  Hoechst-on-the-Main,  and  the  firm  of  Leopold 
Cassella  &  Co.  at  Frankfort-on-the-Main,  to  be  described 
in  detail  later  on,  was  founded  essentially  for  the  reason 
that  the  one  produced  certain  raw  materials  required  by 
the  other  in  its  production,  and  that  the  two  works  are  in 
position  to  supplement  each  other  favorably  as  regards  a 
number  of  products  produced  by  the  one  and  purchased  by 
the  other.  In  addition,  there  was  danger  of  a  constantly 
growing  competition  between  the  two  works  in  certain 
products. 

Later  on  we  shall  have  occasion  to  set  forth  the  devel- 
opment of  the  concentration  that  took  place  in  the 
electro-technical  industry,  where  it  proceeded  by  leaps  and 
bounds. 


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The     German     Great     Banks 

2.  The  combination  of  enterprises  brought  about  by 
the  above-described  and  other  economic  and   technical 
causes  ^fomoTed  at  the  safne  timeTfie  grouping  of  inde- 
pendent enterprises  ia- the  form  of  cartels,  of  which  we 
have  spoken  in  detail  in  an  earlier  section  (p.   167  and 
following) .     The  reasonTs^that  the  chances  of  cartel  for- 
mation in  an  industry  increase  with  the  growth  of  produc- 
tion and  the  size  of  the  enterprises.     One  essential  condi- 
tion of  the  formation   of   cartels,  or,  at  any  rate,  one 
condition  which  greatly  promotes  that  process,  as  we  have 
seen,  is  the  existence  of  a  small  number  of  concentrated 
enterprises  of  vast  extent — the  fewer  in  number  the  better— 
and  the  consequent  large-scale  production  of  staple  goods. 

3.  The  formation  of  cartels,  in  its  turn,  greatly  pro- 
moted industrial  concentration  in  its  various  forms,  espe- 
cially the  combination  of  establishments  and  the  fusion  of 
enterprises,  being  the  main  cause  of  the  rapidity  with 
which  the  industrial  concentration  was  accomplished.5 

The  reason  was  that  concentration  offered  to  the  indus- 
trial enterprises- 

(a)  a  means  of  securing  in  a  better  position  within  the 
cartels.  In  this  way,  for  example,  the  mines  united  in  the 
Rhenish- Westphalian  Coal  Syndicate  endeavored  to  ob- 
tain a  higher  quota  within  the  cartel  by  combining  with 
other  mines  which  at  the  time  were  idle  or  not  profitable. 
Under  this  head  come  the  acquisition  of  the  Steingatt  mine 
by  the  Konkordia  Mining  Company,  of  the  Helene  Mine  by 
the  Nordstern  Stock  Company,  of  the  Bommerbdnker 
Tiefbau  Mine  by  the  Mont-Cenis  Mining  Concern,  etc. 

(6)  a  means  to  make  themselves  independent  of  the 
cartels,  either  entirely  or,  at  least,  as  regards  part  of  their 


709 


National    Monetary     Commission 

production.  Thus,  for  example,  the  iron  works  united  in 
the  Rhenish- Westphalian  Pig  Iron  Syndicate,  while  unable 
to  increase  their  production  quota,  were  yet  able  to  employ 
their  works  more  remuneratively  than  would  have  been 
possible  under  the  syndicate  conditions,  by  producing  non- 
syndicated  articles,  which  they  were  enabled  to  do  through 
combination. 

Similarly,  the  formation  of  the  Rhenish- Westphalian 
Coal  Syndicate  induced  the  iron  works  to  acquire  coal 
mines,  because  the  coal  produced  by  themselves  cost  them 
less  than  that  bought  of  the  syndicate. 

The  following  examples  may  be  mentioned: 

Under  the  first  coal  syndicate:  The  fusion  of  the 
Vereinigte  Westphalia  Mine  with  the  Hoesch  Iron  and 
Steel  Works  (1899);  of  the  Vereinigter  Hannibal  Mine 
with  Friedrich  Krupp  (May,  1899);  of  the  Pluto  Stock 
Company  with  the  Schalke  Mine  and  Furnace  Stock 
Company  (June,  1899);  of  the  Dannenbaum  Stock  Com- 
pany with  the  Differdingen-Dannenbaum  Stock  Company 
(end  of  1899);  of  the  General  Mining  Concern  with  the 
Lorraine  Smelting  Corporation  Aumetz-Friede  (January, 
1900) ;  and  of  the  Zentrum  Mining  Concern  with  the 
Rhenish  Steel  Works  (May,  1900). 

Under  the  second  coal  syndicate :  The  union  of  two  works 
into  the  United  van  der  Zypen  Steel  and  Wissener  Iron 
Works  Stock  Company  at  Cologne-Deutz  (September, 
1903) ;  the  union  of  the  Lorraine  Smelting  Corporation 
Aumetz-Friede  with  the  Fentscher  Furnace  Works  (Octo- 
ber, 1903) ;  of  the  Upper  Silesian  Iron  Industry  Stock  Com- 
pany and  the  Bismarckhutte  (February,  1904),  and  of  the 
above-mentioned  Henrichshutte  of  the  Dortmund  Union 


710 


The     German     Great     Banks 

with  the  Hendschel  &  Son  Locomotive  Works  (March, 
I9O4).6  For  the  same  purpose,  other  enterprises  ac- 
quired small  coal  fields,  on  which  they  themselves  estab- 
lished coal  mines,  as,  for  example,  Stumm  Brothers,  who 
acquired  the  Minister  Achenbach  coal  field,  the  Georg 
Marien  Mine-Furnace  Corporation,  which  acquired  coal 
fields  near  Osnabruck  (Werne) ,  the  firm  de  Wendel,  which 
acquired  the  de  Wendel  mine  near  Hamm,  the  Maximilian 
Furnaces,  which  acquired  the  Maximilian  coal  mine  near 
Hamm,  Friedrich  Krupp  and  the  North  German  Lloyd, 
who  acquired  the  Emscher-Lippe  mine  near  Mengede.7 

The  Upper  Silesian  Coal  Convention  did  not  equally  pro- 
mote the  acquisition  of  coal  mines  by  smelting  works, 
because  nearly  all  the  great  smelting  works  of  Upper  Silesia 
had  had  their  own  mines  in  most  cases  since  their  founda- 
tion. The  same  remark  applies  to  the  Ruhr  district. 

Thus,  the  Bochum  Cast  Steel  Corporation  had  had  coal 
mines  of  its  own  since  1868,  the  Dortmunder  Union  since 
1872,  and  the  same  was  true  of  Friedrich  Krupp,  the 
Horder  Mining  and  Smelting  Association,  the  Phoenix 
(in  the  last-mentioned  case  through  the  purchase  of  the 
Meiderich  Coal  Mining  Company  and  the  Westend,  Ruhr, 
and  Rhein  mines  in  1886),  and  finally  the  firm  August 
Thyssen  (through  the  acquisition  of  the  Deutscher  Kaiser 
mine) . 

Finally,  the  concentration  of  enterprises  served — 

(c)  as  a  means  to  secure  a  stronger  basis  and  reduce  the 
number  of  serious  competitors,  in  the  event  that  the 
Rhenish- Westphalian  Coal  Syndicate  should  not  be  re- 
newed at  its  expiration  in  1915,  or  in  case  it  was  broken 
up  before  that  time. 


711 


National    Monetary     Commission 

This  applies  particularly  to  the  association  of  the  two 
iron  works,  the  Aachener  Smelting  Company  Rote  Erde 
and  the  Schalke  Mining  and  Smelting  Company  with 
the  Gelsenkirchen  Mining  Company  (Jan.  i,  1905).  The 
advantages  of  this  union  will  become  apparent  only  later, 
because,  so  long  as  the  present  coal  syndicate  exists,  the 
furnace-mines,  so  far  as  their  coal  production  exceeds  their 
own  consumption,  are  bound  by  the  provisions  of  the 
coal  syndicate,  a  situation  which  no  fusions  can  alter. 

II.  THE  INFLUENCE  OF  THE  BANKS  AND  BANKING  CON- 
CENTRATION ON  INDUSTRIAL  CONCENTRATION. 

From  the  statements  just  made  it  is  evident  that  the 
immediate  reasons  for  industrial  concentration,  perhaps 
also  the  weightiest  reasons,  especially  in  the  coal  and  iron 
industry,  were  technical  in  character,  arising  from  the 
nature  of  industrial  operations  and  large-scale  production, 
and  from  the  formation  of  cartels  within  the  industry. 
At  the  same  time  that  concentration  was  also  influenced, 
promoted,  and  even  made  possible  by  the  banks  and  their 
concentration. 

As  might  be  expected,  this  influence  differed  with  the 
various  branches  of  industry,  being  decisive  in  some  cases, 
less  so  in  others,  and  hardly  perceptible  in  some  cases. 

I.    INFLUENCE  OF  BANKS  ON   INDUSTRIAL  CONCENTRATION   UNAFFECTED  OR 
BUT  SLIGHTLY  AFFECTED   BY  THE   FORMATION  OF  CARTELS. 

If  it  be  permitted  to  distinguish  between  creditor  in- 
dustries and  debtor  industries,  according  as  they  are  able, 
as  a  rule,  to  keep  balances  in  their  favor  in  the  banks,  or 
are  obliged,  as  a  rule,  to  ask  the  banks  for  credit,  we  may 


712 


The     German     Great    Banks 

say  that,  on  the  whole,  the  electro-technical  industry,8 
as  hitherto  developed,  is  in  the  main  a  debtor  industry, 
while  the  chemical  industry  is  a  creditor  industry.  In 
the  mining  industry  the  relation  varies  with  the  times, 
companies,  and  market  conditions. 

(a)    THE   ELECTRO-TECHNICAL   INDUSTRY. 

The  very  fact  that  the  electro-technical  industry  was  in 
the  main  a  debtor  industry  would  suffice  to  show,  if  any 
proof  were  needed,  that  the  development  of  that  industry 
(and  the  same  is  true  of  the  street  railway  and  minor  rail- 
way business  largely  connected  with  the  electrical  business) 
would  have  been  simply  inconceivable  at  any  stage  of  its 
concentration  without  the  help  of  banks.  At  the  very 
birth  of  the  industry,  in  the  beginning  of  the  eighties,  that 
aid  was  all  the  more  necessary  and  welcome,  because  at 
that  time  the  possibility  of  the  development  of  electric 
light  and  power  on  an  industrial  scale  was  doubted  by  the 
immense  majority  of  the  population.  In  this  matter, 
therefore,  the  banks  which,  despite  the  great  risk,  did  not 
refuse  their  aid,  may  justly  claim  to  have  been  in  part 
creators  of  one  of  the  most  vigorous  and  important 
branches  of  German  industry  of  the  present  day.  In  order 
to  set  forth  the  influence  of  the  banks  on  the  electro- 
technical  industry,  it  is  necessary  to  sketch  the  external 
development  of  that  industry  in  Germany. 

In  1883,  with  the  vigorous  cooperation  of  a  number  of 
banks  and  banking  firms,  the  first  German  stock  company 
in  the  electric  industry  was  established  by  Emil  Rathe- 
nau,  in  concert  with  Siemens  &  Halske,  the  Paris  Expo- 
sition of  1 88 1  having  led  to  the  conviction,  especially  in 


713 


National    Monetary     Commission 

Rathenau's  mind,  of  the  great  possibilities  of  the  new  in- 
vention. That  stock  company  was  the ''German  Edison 
Company  for  Applied  Electricity"  (Deutsche  Edison  Ge- 
sellschaft  fur  angewandte  Elektrizitdt) ,  which  in  1884  made 
itself  completely  independent  of  Siemens  &  Halske  and  in 
1887  assumed  the  present  firm  name  of  the  Allgemeine 
Elektrizitdts  Gesellschaft  (General  Electric  Company).  It 
succeeded  in  improving  the  so-called  three-phased  current 
system  to  such  an  extent  that  in  1891  it  was  able  to  con- 
duct 300  horsepower  with  very  favorable  working  effect  a 
distance  of  173  kilometers  to  the  electric  exposition  in 
Frankfort-on-the-Main,  an  achievement  which  produced  a 
great  impression. 

In  1896  there  were  already  in  existence,  as  noted  else- 
where (p.  123),  39  stock  companies  in  the  electrical  indus- 
try, nearly  all  of  them  called  into  life  by  the  aid  of  banks. 
In  1900  the  German  bourses  had  already  listed  the  stock 
of  34  such  stock  companies,  with  capital  of  436,000,000 
marks  (in  Berlin  alone  22  companies  with  capital  of 
396,700,000  marks)  for  trade  and  quotation.  The  divi- 
dend income  of  stockholders  in  those  34  stock  companies 
in  the  period  1883-1900  averaged  8.38  per  cent. 

In  1898  the  total  production  of  the  German  electro- 
technical  industry  was  valued  at  228,700,000  marks; 
211,100,000  marks,  or  92.3  per  cent,  being  the  value  of 
products  of  the  strong-current  factories,  which  twenty 
years  earlier  was  insignificant,  while  the  products  of  the 
weak-current  industry  in  1898  amounted  only  to  1 7,600,000 
marks.  Beginning  with  the  middle  of  the  nineties  the 
expansion  of  the  electro-technical  industry  was  enormous. 
It  can  not  be  denied,  however,  that  this  rapid  and  desul- 


714 


The     German     Great    Banks 

tory  expansion  was  largely  responsible  for  the  general 
overproduction  which  led  to  the  crisis  of  1901. 

The  fact  is  that  during  those  years,  up  to  1900,  a  veritable 
chaos  of  forms  of  enterprises  and  methods  of  financing  had 
been  developed  within  the  electrical  industry,  resulting  in 
seven  groups  with  28  companies,  as  follows: 

I.  The  Siemens  &  Halske  group,  with: 

1.  The  Siemens  &  Halske  Stock  Company  in  Berlin. 

2.  The  Swiss  Company  for  Electric  Industry  in  Basle. 

3.  The  "Siemens"  Electric  Works  Stock  Company,  Berlin. 

4.  The  Electric  Light  and  ^  Power  Establishment  Stock  Company, 

Berlin. 

II.  The  A.  E.  G.  (Allgemeine  Elektrizitats-Gesellschaft)  group,  with: 

i  The  Allgemeine  Elektrizitats-Gesellschaft  (General  Electric  Com- 
pany), Berlin. 

2.  The  Bank  for  Electric  Enterprises,  Zurich. 

3.  The  General  Local  and  Street  Railway  Company,  Berlin. 

4.  The  Electricity  Supply  Company,  Berlin. 

III.  The  Schuckert  group,  with: 

1.  The  Electricity  Stock  Company  (formerly  Schuckert  &  Co.),  Nu- 

remberg. 

2.  The  Continental  Company  for  Electric  Enterprises,  Nuremberg. 

3 .  The  Rhenish  Schuckert  Company  for  Electric  Industry,  Mannheim . 

4.  The  Elektra  Stock  Company,  Dresden. 

IV.  The  U.  E.  G.  (Union  Electric  Company)  group,  with : 

1.  The  Union  Electricity  Company,  Berlin. 

2.  The  Company  for  Electric  Enterprises,  Berlin. 

V.  The  Helios  group,  with : 

1.  The  Helios  Electricity  Stock  Company,  Cologne. 

2.  The  Stock  Company  for  Electric  Establishments,  Cologne. 

3.  The  Stock  Company  Bavarian  Electric  Works,  Munich. 

4.  The  Bavarian  Electric  Company,  Helios  Stock  Company,  Munich. 

5.  The  Electricity  Company,  Felix  Singer  &  Co.,  and  Bank  for 

Electric  Industry,  Berlin. 

VI.  The  Lahmeyer  group,  with: 

1.  The  Electricity  Stock  Company  (formerly  W.  Lahmeyer  &  Co.), 

Frankfort  on-the-Main. 

2.  The  German  Company  for  Electric  Enterprises,  Frankfort  on- 

the-Main.(9) 

VII.  The  Kummer  group,  with: 

1.  Tlie  Stock  Company  Electric  Works  (formerly  O.  L.  Kummer  & 

Co.),  Dresden. 

2.  The  Stock  Company  for  Electric  Establishments  and  Railways, 

Dresden, 


National    Monetary     Commission 

VII.  The  Kummer  group,  with — Continued. 

3.  The  Baltic  Electricity  Company,  Kiel. 

4.  The  Electric  Stock  Company  (formerly  Hermann  Poge),  Chemnitz. 

5.  The  Northern  Electric  and  Steel  Works,  Danzig. 

6.  The  South  German  Electricity  Stock  Company,  Ludwigshafen. 

7.  The  Electric  Operation  Stock  Company,  Dresden. 

Each  of  these  groups  thus  had  at  least  one  trust  company 
associated  with  it,  intended  to  relieve  the  banks  of  a  part 
of  the  financing  operations  (founding,  transforming,  issue) 
to  which  they  would  otherwise  hardly  have  been  equal. 
These  were  the  companies  marked  2  and  4  in  Group  I,  and 
2  in  Groups  II-VII.  All  these  trust  companies  were 
founded  between  1894  and  1898.  On  the  other  hand,  the 
independent  electric  firms  organized  themselves  into  a 
"Union  of  Electro -technic  Installation  Firms  in  Ger- 
many" and  the  factories  of  electro -technic  specialties — into 
the  "  Union  for  the  Protection  of  Common  Economic 
Interests  of  the  German  Electro -technical  Industry." 

Behind  those  seven  groups  of  electric  enterprises  stood 
at  that  time  (1900)  as  many  banks  and  groups  of  bankers 
whose  organization  was  caused  by  the  vast  demands  made 
on  their  financial  capacity  by  the  electro-technic  industry 
united  in  the  corresponding  groups.  These  banking 
groups  were  as  follows: 

I.  Siemens  &  Halske  Stock  Company: 

1.  Deutsche  Bank. 

2.  Bank  fur  Handel  und  Industrie  (Darmstadter  Bank). 

3.  Berliner  Handelgesellschaft. 

4.  Diskonto-Gesellschaft. 

5.  Dresdner  Bank. 

6.  Mitteldeutsche  Kreditbank. 

7.  S.  Bleichroeder. 

8.  Delbriick,  Leo  &  Co. 

9.  Jacob  S.  H.  Stern,  Frankfort-on-the-Main. 

10.  L.  Speyer-EHissen,  Frankfort-on-the-Main. 

11.  Bergisch-Markische  Bank. 


716 


Th 


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r  e  a 


t    B 


a  n 


II.  General  Electric  Company: 

1.  Berliner  Handelsgesellschaft. 

2.  Deutsche  Bank. 

3.  Nationalbank  fur  Deutschland. 

4.  Delbriick,  Leo  &  Co. 

5.  Hardy  &  Co. 

6.  Gebruder  Sulzbach,  Frankfort-on-the-Main. 

7.  E.  Heimann,  Breslau. 

8.  Rheinische  Diskonto-Gesellschaft. 

III.  Electric  Stock  Company,  formerly  Schuckert  &  Co.: 

i.  W.  H.  Ladenburg  &  Sohne,  Mannheim. 

Anton  Kohn,  Nuremberg. 

Kommerz-  und  Diskontobank. 

Von  der  Heydt-Kersten  &  Sohne. 

E.  Ladenburg,  Frankfort-on-the-Main. 

J.  Dreyfus  &  Co.,  Frankfort-on-the-Main. 

Bayrische  Vereinsbank. 
8.  Bayrische  Hypotheken-  und  Wechselbank. 

IV.  Union  Electric  Company: 

1.  Disconto-Gesellschaft. 

2.  Dresdner  Bank. 

Bank  fur  Handel  und  Industrie  (Darmstadter  Bank). 
A.  Schaaffhausen'scher  Bankverein. 10 
S.  Bleichroeder. 
Born  &  Busse. 

V.  Helios  Electricity  Company: 

1.  J.  L.  Eltzbacher  &  Co.,  Cologne. 

2.  J.  H.  Stein,  Cologne. 

3.  Sal.  Oppenheim,  Jr.,  &  Co.,  Cologne. 

4.  Deutsche  Genossenschaftsbank  Soergel,  Parrisius  &  Co. 

5.  Berliner  Bank. 

6.  C.  Schlesinger,  Trier  &  Co. 

7.  Deutsche  Effekten-  und  Wechselbank. 

8.  L.  Behrens  Sohne,  Hamburg. 

9.  Niederrheinische  Kreditanstalt. 

VI.  Elektrizitats-Aktiengesellschaft,  formerly  W.  Lahmeyer  &  Co.: 

1.  von  Erlanger  &  Sohne,  Frankfort-on-the-Main. 

2.  Bank  fur  Handel  und  Industrie  (Darmstadter  Bank). 

3.  Grunelius  &  Co.,  Frankfort-on-the-Main. 

4.  Oberrheinische  Bank. 

5.  B.  M.  Strupp,  Gotha. 

6.  D.  und  J.  de  Neufville,  Frankfort-on-the-Main. 

7.  Phil.  Nic.  Schmidt,  Frankfort-on-the-Main. 

8.  Joh.  Goll  &  Sohne,  Frankfort-on-the-Main. 


717 


National    Monetary     Commission 

VII.  Aktiengesellschaft  Elektrizitatswerke,  formerly  O.  L.  Kummer  & 
Co.: 

1.  Kreditanstalt  fur  Industrie  und  Handel,  Dresden. 

2.  Deutsche  Genossenschaftsbank  Soergel,  Parrisius  &  Co. 

The  development,  however,  did  not  stop  at  this  point. 
The  Kummer  group  (VII  in  the  table  above)  collapsed  in 
1900.  About  the  same  time  the  Helios  group  lost  a  large 
part  of  its  importance,  and  ownership  of  the  shares  of  its 
trust  company,  the  company  for  Electric  Establishments 
passed  to  the  Electric  Light  and  Power  Establishment 
Stock  Company,  one  of  the  subsidiary  corporations  of 
the  Siemens  &  Halske  group. 

In  the  year  1902-3  a  community  of  interest  was  con- 
cluded between  the  Allgemeine  Elektrizitatsgesellschaft  and 
the  Union-Elektrizitdtsgesellschaft,  the  subsidiary  company 
of  the  Loewe  concern,  which  was  followed  in  1904  by  a 
complete  merger,  accompanied  by  the  combination  of  the 
banks  of  the  U.  E.  G.  group  (IV,  1-6)  with  those  of  the 
A.  E.  G.  group. 

In  1903  a  part  of  the  Siemens  &  Halske  enterprises  were 
combined  with  the  Schuckert  Company  into  the  Siemens- 
Schuckert-Werke  G.  m.  b.  H.  (original  capital  90,000,000 
marks),  so  that  at  present  the  Lahmeyer  and  Helios 
groups  are  confronted  by  the  much  more  powerful  Sie- 
mens-Schuckert  group  and  the  Allgemeine  Elektrizitats- 
Gesellschaft. 

Toward  the  end  of  1908  an  agreement  for  cooperation 
was  concluded  between  the  Siemens-Schuckert  group  and 
the  A.  E.  G.,  with  the  result  that  they  jointly  organized 
the  Elektro-Treuhand-Gesellschaft  (Electrical  Fidelity  Com- 
pany) with  a  capital  of  30,000,000  marks,  a  credit  institu- 
tion whose  object  is  to  make  loans  on  securities  issued  by 

718 


The     German     Great    Banks 


electrical  undertakings  and,  on  the  basis  of  the  securities 
deposited,  to  issue  bonds.  In  this  work  it  will  have  to 
make  use  of  the  assistance  of  the  great  banks,  solidly 
united  for  this  purpose.  The  object  seems  to  be  to 
make  loans,  repayable  in  annuities,  to  large  customers 
in  the  electric  industry — that  is  to  say,  mainly  public 
corporations  and  large  private  companies — for  the  pur- 
pose of  enabling  them  to  enlarge  or  remodel  their  plants, 
so  as  to  insure  a  permanent  demand  for  light  and  power, 
even  under  unfavorable  market  conditions,  without  the 
investment  of  large  capital. 

Thereupon  the  Felten  &  Guilleaume-Iyahmeyer-Werke 
Aktien-Gesellschaft  in  the  beginning  of  1909  established  a 
similar  credit  institution  under  the  name  of  Treuhand-Bank 
fur  die  elektrische  Industrie,  Aktien-Gesellschaft  in  Cologne, 
with  a  share  capital  of  25,000,000  marks.  The  by-laws  of 
both  companies  permit  the  issue  of  bonds  up  to  three  times 
the  amount  of  their  capital. 

As  regards  the  question  of  concentration,  each  of  the 
great  electric  companies,  through  the  above-described 
network  of  trust,  operating,  and  subsidiary  companies, 
which  as  a  rule  can  only  be  started  with  the  aid  of  the 
supporting  banks,  forms  a  widely  ramified  group,  whose 
gradual  development,  extension,  and  differentiation  is 
rendered  possible,  or  at  any  rate  largely  promoted,  by 
the  banks.  But  when  such  groups  are  once  formed  their 
demands  quickly  outgrow  the  forces  of  a  single  bank, 
which  of  course  is  interested  in  a  multitude  of  other  indus- 
trial enterprises.  The  natural  result  is  the  formation  of 
bank  groups  behind  the  industrial  groups,  so  that  at  this 
stage  the  industrial  concentration  tends  once  more 


719 


National    Monetary     Commission 

directly  to  induce  and  greatly  to  promote  concentration 
in  the  banking  business.  Finally,  the  many  relations 
existing  between  the  several  industrial  groups  and  indi- 
vidual banks  belonging  to  a  group  of  banks  (some  banks 
belong  to  several  groups)  lead  the  banks  on  their  part  to 
promote  further  industrial  consolidations.  This  was  the 
case  in  particular  with  the  establishment  of  a  community 
of  interest  between  the  Allgemeine  Elektrizitdts-Gesellschaft 
(A.  E.  G.)  and  the  Union-Elektrizitats-Gesellschaft  (U.  E.  G.) , 
founded  by  the  firm  lyudwig  Loewe  &  Co.  in  1902-3,  which 
subsequently  (1904)  was  followed  by  the  complete  absorp- 
tion of  the  latter  by  the  former,  combined  with  the 
admission  of  the  banks  of  the  I^oewe  group  into  the 
A.  E.  G.  group,  which  meant  a  complete  realignment  of 
the  groups  previously  existing. 

Similar  processes  took  place  when,  in  1898,  the  A. 
Schaaffhausen'scher  Bankverein,  which  till  then  had 
occupied  the  leading  position  in  the  Schuckert  group, 
attempted  to  effect  a  combination  of  the  Schuckert  group 
with  the  Loewe  group  (U.  E.  G.  group),  and  failing  in 
this  attempt,  seceded  from  the  Schuckert  group  and 
passed  over  to  the  L,oewe  group.  In  this  way  the  Schuck- 
ert group  in  its  turn  was  driven  to  seek  an  alliance  with 
another  group,  which  took  place  in  1903  in  the  form  of 
a  combination  with  the  Siemens  &  Halske  concern, 
though  in  this  case  the  combination  did  not  involve  the 
admission  of  the  banks  of  the  Schuckert  group  into  the 
Siemens  &  Halske  group. 

Thus  we  see  a  constant  fluctuation  of  mutual  influence; 
we  perceive  the  powerful  effect  which  the  grouping  process 
in  the  industrial  field  exerts  on  the  similar  process  in  the 


720 


The     German     Great    Banks 

banking  field,  and  vice  versa,  and  how  readily  changes  in 
the  one  induce  changes  in  the  other. 

(6)  THE   CHEMICAL   INDUSTRY. 

The  concentration  movement  presents  an  entirely 
different  picture  in  the  chemical  industry.  As  I  ob- 
served above,  the  chemical  industry  may  properly  be 
described,  for  a  number  of  years  back,  as  essentially  a 
creditor  industry.  It  has  been  less  subject  to  the  sharp 
alternations  of  business  prosperity  and  adversity  than 
other  branches  of  industry.  On  the  other  hand  it  has 
had  to  face  daily  new  problems.11 

At  the  close  of  this  period  the  chemical  industry 
passed  through  a  development  similar  to  that  of  the 
electrical  industry.  This  applies  particularly  to  the 
aniline  dye  works,12  which  supply  by  far  the  greater 
part  of  the  world's  demand  for  artificial  dyes.  As  a 
result  of  severe  domestic  competition,  however,  these 
establishments  recently  felt  the  need  of  combination. 
The  most  important  aniline  (coal  tar)  dye  factories  of 
Germany  are  the  following:  The  Badische  Anilin-und 
Sodafabrik  in  Ludwigshafen-on-the-Rhine;  the  Farben- 
fabriken  normals  Friedrich  Bayer  &  Co.,  in  Elberfeld; 
Leopold  Cassella  &  Co.,  in  Frankfort-on-the-Main;  the 
Farbwerke  normals  Meister,  Lucius  &  Bruning,  in  Hochst- 
on-the-Main,  and  the  Aktiengesellschaft  fur  Anilinfabri- 
kation13  (Aniline  Dyes  Manufacturing  Company)  in 
Treptow,  near  Berlin. 

In  October,  1904,  a  close  alliance  was  founded  by  the 
following  two  concerns:  The  Dye  Works,  formerly  Meister, 
lyucius  &  Briining,  of  H6chst-on-the-Main,  a  corporation 


90311°— ii 47  721 


National    Monetary     Commissio 


n 


having  at  the  time  a  capital  stock  of  20,000,000  marks 
and  a  bonded  debt  of  10,000,000  marks,  and  the  firm  of 
Leopold  Cassella  &  Co.,  in  Frankfort-on-the-Main.  This 
union  became  effective  on  January  i,  1904.  Its  primary 
justification  lay  in  the  fact  that  the  first -named  concern 
was  producing  a  large  variety  of  raw  materials  needed 
by  the  latter  in  its  manufacture.  Furthermore,  these 
plants  could  advantageously  supplement  one  another  for 
the  reason  that  a  number  of  commodities  produced  by 
the  one  were  needed  by  the  other,  while  for  a  number 
of  commodities,  there  was  danger  of  increasing  competi- 
tion between  the  two  concerns.  This  union  involved  the 
interchange  of  raw  materials,  cooperation  in  all  matters 
of  patents  and  licenses,  the  joint  purchase  of  coal,  and 
joint  activity  in  establishing  branches  both  in  Germany 
and  in  foreign  countries.  It  was  expected  that  this 
combination  would  call  a  halt  on  the  enormous  decline 
in  the  prices  of  coal-tar  dyes,  and  put  these  establish- 
ments in  a  materially  stronger  position  to  meet  competi- 
tion of  foreign  producers,  particularly  those  in  Switzer- 
land. At  the  time  that  country  did  not  afford  protection 
to  patented  chemical  products,  with  the  result  that  Swiss 
factories  could  exploit  German  inventions  without  extra 
expense  to  themselves,  a  situation  that  was  remedied  to 
a  limited  extent  by  the  most  recent  German-Swiss  com- 
mercial treaty. 

The  combination  was  effected  in  the  following  man- 
ner: The  firm  Leopold  Cassella  &  Co.  was  reorganized 
as  a  limited  liability  company  with  a  capital  stock  of 
20,000,000  marks  and  a  bonded  debt  of  10,000,000  marks, 
and  transferred  to  the  Hochst  Dye  Works  (formerly 


722 


The     German     Great     Banks 

Meister,  L,ucius  &  B  riming)  5,500,000  marks  of  its  shares 
in  exchange  for  the  same  amount  of  shares  newly  issued 
especially  for  the  purpose  by  the  Hochst  works.  The 
capital  stock  of  the  latter  concern  had  thus  become 
increased  from  20,000,000  marks  to  25,500,000  marks. 
At  the  same  time  the  partners  of  the  firm  Leopold 
Cassella  &  Co.  were  made  members  of  the  supervisory 
board  of  the  Hochst  Dye  Works,  while  some  members 
of  the  executive  board  of  the  Hochst  concern  joined  the 
advisory  board  of  the  firm  of  Leopold  Cassella  &  Co. 

In  1908  the  firm  Kalle  &  Co.,  a  stock  company  in 
Bieberich-on-the-Rhine,  joined  the  combination.  This 
union  was  effected  by  the  acquisition  of  the  majority  of 
the  stock  of  the  above  company  by  the  Hochst  Dye 
Works.  The  latter  increased  its  capital  stock  by  i  o,  500,000 
marks  to  a  total  of  36,000,000  marks,  using  part  of  the 
increase  (1,600  shares)  to  acquire  a  controlling  interest 
(3,200,000  marks)  in  the  concern  Kalle  &  Co.  The 
dual  alliance  thus  became  a  triple  alliance. 

On  the  basis  of  a  contract  entered  into  December  3, 
1904,  a  closer  union  than  the  above  was  founded  by  the 
Rhenish  establishments,  the  Badische  Anilin  und  Soda- 
fabrik,  of  Ludwigshafen,  having  a  capital  stock  of 
21,000,000  marks,  and  the  Farbenfabriken  vormals  Fried- 
rich  Bayer  &  Co.,  of  Elberfeld,  having  a  capital  stock  of 
21,000,000  marks,  on  the  one  hand,  and  the  Aktiengesell- 
schaft  fur  Anilinfabrikation,  of  Treptow,  near  Berlin,  hav- 
ing a  capital  of  9,000,000  marks,  on  the  other.  The  last- 
named  company  was  drawn  into  the  combination  during 
the  course  of  negotiations  between  the  other  two.  It 
was  about  to  embark  upon  the  manufacture  of  additional 


723 


National     Monetary     Commission 

articles  on  which  the  patents  had  expired,  and  to  increase 
its  output  through  the  establishment  of  a  new  plant  at 
Rheinau,  being  thus  in  a  position  to  offer  keen  competi- 
tion to  the  Ludwigshafen  concern.  A  triple  alliance  was 
thus  founded  which  became  effective  on  January  i,  1905. 
The  members  were  to  share  in  the  profits  and  losses  of  the 
combination,  14  per  cent  of  the  joint  results  to  be  the  share 
of  the  Treptow  concern  and  43  per  cent  the  share  of  each 
of  the*  other  two. 

It  is  self-evident  that  this  development  has  not  yet 
reached  its  final  goal.  There  is  even  now  an  agreement 
between  the  Badische  Anilin-und  Sodafabrik  and  the 
Hochst  Dye  Works  by  which  they  act  in  common  in 
fixing  the  selling  price  of  artificial  indigo  manufactured 
by  both.  It  is  quite  likely  that  the  Hochst-Cassella- 
Kalle  &  Co.  combination  and  the  other  triple  alliance 
(Badische  Anilinfabrik,  Bayer,  and  the  Aktiengesell- 
schaft  fur  Anilinfabrikation)  will  gradually  get  together 
in  one  way  or  another  and  at  some  more  or  less  distant 
future  time  form  a  consolidation  of  all  aniline  dye  works 
or  some  looser  union. 

There  is  no  doubt  that  the  decisive  factors  making  for 
the  progress  of  concentration  in  the  chemical  industry 
have  been  essentially  technical  ones.  The  initiative  for 
the  developments  thus  far  has  come,  in  the  main,  we 
may  say,  exclusively  from  the  industry  itself.  The  extent 
of  concentration,  the  direction  taken,  and  the  rapidity 
of  the  movement  have  accordingly  been  dependent  on  the 
special  needs  of  the  industry.  Whatever  the  assistance 
of  the  banks  in  the  formation  of  these  alliances  and  groups 
in  the  chemical  industry — not  to  speak  of  their  initiative 


724 


The     German     Great    Banks 

in  this  movement — is  so  little  perceptible  that  it  may 
safely  be  put  down  as  very  slight,  indeed.  In  marked 
contrast  to  the  progress  of  concentration  in  the  electrical 
industry,  there  is  no  evidence  of  any  considerable  influence 
exerted  by  the  banks  on  the  movement  toward  concen- 
tration. Inversely,  this  industry  has  had  as  little  effect 
on  concentration  in  banking. 

2.  INFLUENCE  OP  BANKS  AND  BANKING  CONCENTRATION  ON  CONCENTRATION 
IN  INDUSTRIES  WITH  STRONG  CARTEL  TENDENCIES.  (THE  MINING  AND 
METALLURGICAL  INDUSTRIES.) 

The  process  of  concentration  consummated  in  the 
mining  industry  presents  an  entirely  different  picture. 
As  we  saw,  it  was  largely  influenced  by  the  formation  of 
cartels.  Here  banks  and  concentration  in  banking 
have  exerted  a  vast  influence  on  industrial  concentration. 
As  we  shall  show  in  detail,  this  influence  varied  greatly 
not  only  in  the  different  districts,  but  also  in  the  different 
coal  mines  and  iron  works. 

There  can  be  no  question  that  in  mining  as  in  other 
industries  the  choice  of  the  forms  in  which  concentration 
was  effected — merger,  community  of  interest,  etc. — was 
not  made  without  the  influence  of  the  banks  or  with- 
out due  regard  to  their  business  interests  or  policies. 
This  was  but  the  natural  outcome  of  the  fact  that  bank 
directors  were  represented  largely  on  the  supervisory 
boards  of  the  mining  and  metallurgical  companies,  fre- 
quently occupying  the  very  influential  posts  of  chairmen 
or  vice-chairmen.  Moreover,  the  intimate  relations  with 
the  banks  existing  in  all  business,  and  notably  in  the 
mining  and  metallurgical  industries,  as  a  result  of  credit 


725 


National    Monetary     Commission 

and  current-account  relations,  naturally  had  their  effect 
on  the  choice  of  the  forms  of  industrial  concentration.14 

In  discussing  above  the  industrial  activity  of  the  A. 
Schaafhausen'scher  Bankverein  (p.  509  et  seq.),  we  men- 
tioned a  large  number  of  instances  which  could  be  readily 
multiplied  in  which  the  bank  not  only  brought  about  the 
organization  of  new  corporations,  the  change  of  private 
firms  into  corporations  and  reorganizations,  but  also 
effected  mergers  of  concerns  which  formed  part  of  its 
clientele.  It  did  this  with  the  express  purpose  of  com- 
bining establishments  devoted  to  various  operations,  a 
type  of  concentration  discussed  above  (p.  704  et  seq.). 

Moreover,  as  we  saw,  the  A.  Schaafhausen'scher  Bank- 
verein in  1899  assumed  directly  the  function  of  a  sales 
agency  and  clearing  house  for  the  Federation  of  German 
wire  rope  manufacturers.  Going  farther,  it  organized  a 
special  Syndicate  Bureau  of  the  A.  Schaafhausen'scher 
Bankverein  (Limited) ,  with  a  capital  of  1,000,000  marks. 
The  bureau  was  intended  to  serve  for  other  industrial 
combinations  in  the  same  capacity  as  the  parent  bank  did 
for  the  federation  just  named. 

It  is  certain,  moreover,  that  the  entire  German  banking 
world,  as  may  be  seen  from  numerous  reports,  not  only 
welcomed  such  important  cartels  as  the  Rhenish- West- 
phalian  Coal  and  Iron  Syndicates  and  the  Steel  Works' 
Union,  but  in  many  cases  helped  to  bring  them  into 
existence,  as  far  as  it  lay  in  their  power  and  within 
limits  compatible  with  their  other  duties.  This  they 
did  not  only  in  the  interest  of  the  general  welfare,  and  of 
the  prosperity  of  industry  in  general,  but  in  the  last 
analysis  also  in  the  interest  of  their  own  business, 


726 


T h  e     German     Great    Banks 

closely  bound  up  with  the  growth  and  prosperity  of  the 
industry  which  was  to  be  fostered  by  the  establishment 
of  cartels.  An  example  of  the  banks'  activity  in  bringing 
about  the  formation  of  a  cartel  is  the  case  of  the  Phoenix. 
The  management  of  the  Phoenix  was  unwilling  to  enter 
the  Steel  Works'  Union — which  could  not  be  organized 
without  it — unless  it  received  greater  advantages  than 
the  union  felt  able  to  grant.  There  is  little  doubt  that 
these  efforts  on  behalf  of  the  cartel  were  started  by  the 
banks  which  were  not  represented  on  the  directorate  of 
the  Phoenix  and  which  were  therefore  entirely  free  in 
their  action.  We  may  also  grant  that  those  firms  which 
were  represented  on  the  board,  as  they  asserted,  refrained 
from  exerting  a  direct  influence  on  their  customers  as  to 
how  they  •  should  vote  at  the  special  meeting  of  stock- 
holders of  April  26,  1904,  at  which  final  action  was  to 
be  taken.  On  the  other  hand,  it  is  equally  true  that 
they  maintained  an  attitude  of  " benevolent  neutrality" 
toward  the  wishes  for  the  realization  of  the  Steel  Works' 
Union. 

A  benevolent  neutrality  of  this  kind  was  maintained  on 
similar  occasions  also  by  banking  establishments  which 
counted  among  their  clients  concerns,  whose  interests 
lay  in  the  opposite  direction.  In  business,  as  in  politics, 
such  an  attitude  may  be  of  great  importance.  Under 
given  circumstances  it  may  be  equivalent  to  the  ad- 
vancement of  the  cartel.  At  least  it  would  absolve  the 
latter  from  the  necessity  of  taking  measures  for  defense  or 
of  granting  concessions  such  as  might  otherwise  become 
necessary.  Hans  Gideon  Heymann 15  therefore  justly 
assumes  that  with  the  A.  Schaaffhausen'scher  Bankverein 


7*7 


National    Monetary     Commission 

in  control  of  the  Internationale  Bohrgesellschaft  (Inter- 
national Exploration  Company)  through  ownership  of  an 
overwhelming  majority  of  its  stock,  it  was  certain  that  no 
obstacles  would  be  put  in  the  way  of  the  Coal  Syndicate 
from  this  source,  such  as  might  have  arisen  from  the  sale 
of  its  coal  fields  to  interests  outside  the  syndicate. 

As  far  as  my  knowledge  and  experience  go,  complete 
neutrality  toward  a  cartel  contemplated  in  any  branch  of 
industry  has  been  observed  by  the  banks  only  where 
there  was  a  conflict  of  interests,  and  whenever  they  were 
forced  into  that  position  through  having  influential  clients 
in  both  camps.  Such  a  conflict  of  interests  has  fre- 
quently existed  between  the  coal  and  iron  industries,  and 
has  become  very  pronounced  when  syndicates  were  con- 
templated in  either  industry.  It  was  such  a  situation 
which  dictated  the  position  taken  by  the  A.  Schaaff- 
hausen'scher  Bankverein  and  the  Berliner  Handelsgesell- 
schaft  at  the  time  when  the  organization  of  the  first  coal 
syndicate  was  being  planned.  Both  institutions  were 
maintaining  close  relations  with  the  Harpener  Berg- 
baugesellschaft;  at  the  same  time,  however,  both  of  them 
had  large  customers  among  the  iron  works. 

A  similar  situation  confronted  the  banks  in  the  struggle 
which  has  continued  to  the  present  between  the  so-called 
"mixed"  and  the  "pure"  works  (see  p.  175),  and  again  in 
the  conflict  between  the  pure  works  and  the  Steel  Works' 
Union,  and  particularly  during  that  phase  when  the 
former  demanded  the  abolition  of  the  tariff  duties  on 
their  raw  materials,  an  issue  involving  far-reaching  conse- 
quences for  other  industries  closely  related  to  the  banks. 
Here,  however,  there  was  an  entirely  different  alignment 

728 


The     German     Great    Banks 

of  forces,  which  made  it  easier  for  the  banks  to  decide 
what  position  to  take. 

On  the  other  hand,  there  were  cases,  when  the  affairs  of 
some  powerful  customers  were  bound  up  so  closely  with 
the  bank,  that  the  latter  felt  constrained  to  help  them 
directly  in  carrying  out  their  plans,  even  where  circum- 
stances would  have  seemed  to  make  it  imperative  for  the 
bank  to  observe  neutrality. 

Thus  we  pointed  out  that  in  the  negotiations  looking 
to  the  formation  of  the  first  coal  syndicate  (in  September, 
1903)  the  Disconto-Gesellschaft  was  most  active  in  its 
assistance  to  the  Gelsenkirchener  Bergwerksgesellschaft,  one 
of  its  best  customers,  which  took  the  leading  part  in  the 
negotiations.  In  the  same  way  the  Darmstadter  Bank 
must  surely  have  used  every  endeavor  to  help  the  Deutsch- 
Luxemburgische  Bergwerks-  und  Huttenaktiengesellschajt 
(German-Luxemburg  Mining  and  Furnace  Company)  in 
its  efforts  to  organize  or  extend  the  Luxemburg-Lorraine 
Pig  Iron  Syndicate,  for  it  had  furnished  the  large  resources 
needed  for  the  reorganization  of  the  Aktiengesellschaft  fur 
Eisen-  und  Kohlenindustrie  Differdingen-Dannenbaum  (the 
DifTerdingen-Dannenbaum  Iron  and  Coal  Corporation) 
and  its  transformation  into  the  above-named  corporation, 
and  had  made  of  it  technically  one  of  the  best  equipped 
concerns  in  the  industry.  The  same  no  doubt  applies  to 
the  A.  Schaaffhausen'scher  Bankverein,  whose  relations 
to  the  Aumetz-Friede  Company  were  so  intimate  as  to 
compel  the  bank  to  pursue  a  similar  line  of  action. 

Under  this  head  we  may  include  also  the  strenuous 
efforts  made  by  the  banks  to  prevent  the  taking  over  of 
the  Hibernia  Mining  Company  by  the  Government,  and 


729 


National    Monetary     Commission 

to  insure  its  independent  existence  by  equipping  it  with 
all  modern  means  of  existence  and  growth.  This  case  is 
of  particular  interest  as  illustrating  in  a  marked  form  how 
the  industrial  policies  of  the  great  banks  are  shaped 
according  to  the  character  of  their  industrial  clientele. 
On  the  one  side,  opposed  to  the  government  ownership 
of  the  Hibernia,  there  was  arrayed  a  number  of  banks 
headed  by  the  banking  firm  of  S.  Bleichroder  and  the 
Berliner  Handelsgesellschaft.  On  the  other  side,  favor- 
ing the  Government,  there  were  lined  up  other  banks, 
notably  the  Dresdner  Bank  and  the  A.  Schaaffhausen'- 
scher  Bankverein,  making  equally  strenuous  though 
futile  efforts  to  carry  through  the  acquisition  of  the  mines 
by  the  Government. 

The  activity  of  the  large  banks  in  the  formation  of 
syndicates  has,  however,  as  a  rule,  more  important  con- 
sequences. As  we  observed,  the  organization  of  large 
cartels,  which  in  themselves  represent  a  type  of  concen- 
tration, usually  involves  the  erection,  equipment,  and 
amalgamation  of  large  "mixed  "  works  devoted  to  a  vari- 
ety of  operations,  thus  promoting  another  form  of  concen- 
tration. Such  were  primarily  the  results  of  the  organiza- 
tion of  the  great  coal,  iron,  and  coke  syndicates.  Particu- 
larly is  this  true  of  the  I/orraine-Luxemburg  Pig  Iron 
Syndicate,  the  operations  of  which  extend  a-lso  to  the 
export  trade.  This  syndicate  was  first  organized  in  1879 
under  the  lead  of  the  trading  firm  of  Spaeter  &  Co.,  which 
was  particularly  interested  in  the  Rombach  Furnaces. 

Establishments  carrying  on  more  than  one  operation,  or 
so-called  "mixed"  works,  have  long  been  overwhelmingly 
in  the  majority  in  the  Lorraine  industry,  the  beginning  of 


730 


The     German     Great    Banks 

which  may  be  traced  back  to  the  thirteenth  century.  As 
early  as  1704  the  de  Wendel  family  had  taken  over  the 
Hayinger  Works,  and  at  the  opening  of  the  nineteenth 
century  it  had  established  "mixed"  works.  With  the 
annexation  of  Lorraine  part  of  the  works  was  transferred 
to  France  or  French  branches  were  founded. 

The  chief  works  on  the  Saar  (Burbach,  Dillingen, 
Stumm,  Rochling)  added  their  own  blast  furnaces  in  the 
eighties  and  nineties.16  The  Dudelingen  Steel  Works 
were  built  from  the  very  beginning  as  a  "  mixed  "  establish- 
ment. Here  there  is  no  evidence  that  the  banks  were  an 
important  factor  in  the  movement  toward  concentration. 

In  the  Saar  district,  where  coal  mining  dates  back  to 
the  fifteenth  century,  the  Prussian  Government  is  in  con- 
trol of  by  far  the  larger  part  of  the  coal  fields.  Here  coal 
mining  was  from  the  beginning  a  prerogative  of  the  terri- 
torial overlord.  The  only  noteworthy  private  interests 
in  this  district  are  those  of  de  Wendel,  which  have  an 
output  in  the  Lorraine  district  of  about  one  million 
tons,  and  of  the  Saar-  und  Mosel-Gesellschaft.  The  latter 
is  under  the  influence  of  Thyssen,  Stinnes,  and  the  Dresd- 
ner  Bank.  New  coal  fields  in  the  Lorraine  district  have 
been  located  by  the  International  Exploration  Company 
(Internationale  Bohrgesellschaft) ,  controlled  by  the 
A.  Schaaffhausen'scher  Bankverein,  both  of  these  cor- 
porations being  closely  related  to  the  Rhenish- West- 
phalian  Coal  S}nidicate. 

More  than  one-half  of  the  iron  furnaces  in  the  Saar 
district  were  in  the  hands  of  the  Stumm  family  more 
than  one  hundred  years  ago.  The  Neunkirchener  Iron 
Works,  the  Dillinger  Hiitte  Aktiengesellschaft,  and  the 


National    Monetary     Commission 

limited  company  Gebriider  Becking  &  Co.  do  not  compete 
with  one  another,  and  are  owned  in  whole  or  in  part  by 
the  Stumm  family.  Bach  plant  "takes  in  the  different 
processes  in  the  manufacture  of  iron  from  the  ore  to  the 
finished  product,"  but  each  specializes  in  the  production 
of  different  finished  articles.  Here,  too,  we  can  not  speak 
of  any  large  influence  of  banks  on  the  process  of  concen- 
tration. Neither  the  coke  nor  the  pig-iron  syndicate  have 
entered  the  district,  the  establishments  in  the  Saar  district 
consuming  raw  materials  produced  in  the  same  section. 

There  was,  however,  a  conflict  of  interests  between  the 
Saar  establishments  and  the  works  in  the  Moselle  and 
Ruhr  districts,  the  latter  closely  allied  with  the  banks. 
The  Saar  establishments  carried  on  a  vigorous  campaign 
against  the  Moselle  Canal,  fearing  they  would  be  injured 
by  it,  while  the  Moselle  and  Ruhr  works  would  benefit. 
The  banks  interested  in  the  latter  plants  had  to  refrain 
from  taking  part  in  this  conflict,  out  of  regard  for  their 
clients  in  the  Saar  district. 

The  mining  industry  invaded  the  Sieg  district  in  the 
fifties,  when  mineral  coal  supplanted  charcoal.  With  it 
came  the  influence  of  capitalism  as  represented  by  the 
banks.  Mineral  coal  involved  operation  on  a  large  scale 
and  this  meant  the  application  of  capitalist  methods. 
When  in  1856  the  old  furnaces  of  the  Musener  Stahlberg 
were  united  into  one  of  the  most  important  of  the  mixed 
establishments  in  the  customs  union — the  Koln-Musener 
Bergwerks-Aktien-Verein — there  stood  at  the  head  of  it 
great  Rhenish  bankers  and  merchants  like  Deichmann 
and  Mevissen.17 


732 


T h  e     German     Great     Banks 

To-day  the  sway  of  large-scale  production  and  of 
relatively  large  establishments  is  well-nigh  absolute  in 
the  Sieg  district.  Rhenish- Westphalian  furnaces  have 
also  entered  this  section,  some  with  the  assistance  of  the 
banks.  Here,  too,  the  activity  of  the  coal  syndicate  has 
led  to  the  establishment  of  larger  and  larger  furnaces  in 
combination  with  mines.  The  same  tendency  resulted  also 
in  the  formation  on  October  27,  1894,  of  the  association 
for  the  sale  of  Siegerland  pig  iron  (Verein  fur  den  Verkauf 
von  Siegerldnder  Roheisen),  which  in  the  very  same  year 
established  secure  relations  to  the  Rhenish- Westphalian 
Pig  Iron  Syndicate.18  In  other  districts,  the  small  blast 
furnaces  and  rolling  mills  were  more  and  more  consoli- 
dated with  the  help  of  the  banks,  and  transformed  into 
" mixed"  works.  The  small  concerns  in  the  Sieg  district 
which  did  not  follow  their  example,  and  still  survive  as 
"pure"  works,  are  engaged  in  a  desperate  struggle  for 
mere  existence,  hovering  between  life  and  death.  Similar 
conditions  are  found  in  the  I^ahn  and  Dill  district  con- 
sisting of  parts  of  Upper  Hessia,  the  administrative  dis- 
tricts of  Wiesbaden,  and  the  circuit  of  Wetzlar.19 
The  large  coal  production  of  the  Aix-la-Chapelle  region 
affords  a  strong  basis  for  the  iron  furnaces  of  this  region. 
These,  however,  draw  part  of  their  coal  supply  also  from 
the  Ruhr  district.  Adjoining  the  Aix-la-Chapelle  district 
on  the  east  is  the  Eschweiler  coal  district,  and  on  the 
north  the  Wurm  district,  the  latter,  however,  presenting 
less  advantages  for  furnaces. 

The  adoption  of  the  Bessemer  process  at  the  close  of  the 
seventies  led  to  the  rapid  development  of  the  Aachener 
Hutten-Aktienverein  Rote  Erde  into  a  powerful  "mixed" 

733 


National    Monetary     Commission 

steel-making  establishment.  On  the  other  hand  the 
Hoesch  Iron  and  Steel  Company  of  Dortmund  abandoned 
its  plants  in  the  district  almost  entirely  and  transferred 
the  main  part  of  its  works  to  Dortmund.  In  the  same 
way  the  Phoenix  made  no  progress  with  its  furnace  in 
the  Aix-la-Chapelle  district.  Under  the  direction  of  the 
A.  Schaaffhausen'scher  Bankverein  both  works  were  amal- 
gamated into  one  establishment  in  i9O3.20 

With  the  continuous  assistance  of  the  banks,  coal 
mining  in  the  Ruhr  district  has  developed  from  small 
beginnings  to  a  dominant  industry  in  the  Rhenish- West- 
phalian  territory,  a  section  well  provided  both  with 
industrial  establishments  and  banks.  Here,  as  elsewhere, 
the  higher  prices,  established  by  the  coal  and  coke  syndi- 
cates and  particularly  by  the  Rhenish- Westphalian  coal 
syndicate  founded  March  i,  1893,  were  the  immediate 
occasion  for  the  furnaces  to  acquire  their  own  coal  mines, 
a  movement  which  won  for  them  their  increasing  su- 
premacy over  the  concerns  which  have  remained  "pure" 
iron  works.  In  1896  the  Phoenix  acquired  the  Westende 
mine;  the  Dortmunder  Union — the  Adolf  von  Hansemann 
mine  (Mengeder  Bergwerksgesellschaft);  in  1897  the  Gel- 
senkirchener  Bergwerksaktiengesellschaft,  the  leader  of  the 
coal  syndicate,  acquired  the  Westhausen  mine;  the 
Aktiengesellschaft  Kannengiesser — the  Roland  mine.  All 
these  mines  had  been  independent  of  the  syndicate. 

Hoesch,  Krupp,  and  the  Rhenish  Steel  Works  followed 
suit  by  buying  up  syndicate  mines,  a  movement  in  which 
the  banks  were  often  the  intermediaries.  At*  first  they 
attempted  to  secure  through  legal  proceedings  the  right 
to  divert  the  coal  production  of  their  newly  acquired 


734 


The     German     Great    Banks 

properties  for  their  own  use.  When  this  proved  inef- 
fective they  were  soon  able  to  secure  this  right  by  agree- 
ment. The  syndicate  had  to  yield,  for  these  works  were 
in  a  position  to  cause  it  great  annoyance. 

When  the  coal  syndicate  agreement  was  renewed  in 
1903 — a  result  brought  about  largely  by  the  activity  of 
the  banks  in  the  open  and  behind  the  scenes — all  the  mines 
owned  by  the  iron  and  steel  works,  except  those  belonging 
to  the  Government,  joined  the  syndicate.  The  former, 
however,  arranged  it  so  that  under  the  new  agreement 
the  syndicate  provisions  did  not  apply  to  their  entire 
output  but  only  to  the  portion  over  and  above  that  which 
was  consumed  in  their  own  works.  On  the  other  hand, 
however,  the  owners  of  the  coal  mines  were  prohibited 
from,  selling  coal  fields  or  pits  to  other  than  members  of 
the  syndicate  without  first  securing  permission  from  the 
general  convention  of  coal  mine  owners. 

There  remained,  however,  a  point  in  dispute  as  to  what 
should  be  done  in  the  case  of  the  sale  of  coal  mines  to  fur- 
nace owners,  for  the  purpose  of  supplementing  the  inade- 
quate supply  of  coal  for  use  of  their  own  furnaces.  The 
contention  of  the  syndicate  was  that  in  such  cases  the 
entire  output  of  the  newly  purchased  mines  was  to  be 
subject  to  the  regulations  of  the  syndicate.  The  German- 
Luxemburg  Mine  and  Smelting  Stock  Company,  having 
bought  the  Kaiser  Friedrich  mine  for  its  own  use,  brought 
suit  against  the  coal  syndicate,  and  the  contention  of  the 
syndicate  was  not  upheld  by  the  imperial  supreme  court. 
The  court  took  the  position  of  the  company,  namely,  that 
as  much  of  the  output  of  the  newly  acquired  mine  as  was 
needed  by  the  furnace  proper  might  be  used  without 


735 


National    Monetary     Commission 

restriction.  Another  case,  not  regulated  directly,  is  that  of 
a  mining  company  erecting  a  furnace  "in  order  to  find  a 
more  profitable  use  for  its  coal  in  the  manufacture  of  pig 
iron  or  steel  than  in  the  sale  of  its  product  to  the 
syndicate."21 

It  should  be  mentioned,  however,  that  when  the  syndi- 
cate was  extended  it  itself  included  among  its  purposes  the 
acquisition  of  coal  fields  and  mining  shares.  On  the  other 
hand,  the  syndicate  was  protected  against  the  sale  of  coal 
fields  or  mining  shares  to  outsiders  by  the  International 
Exploration  Company,  through  the  "benevolent  neutral- 
ity "  of  the  A.  Schaaffhausen'scher  Bankverein,  which  con- 
trolled this  corporation,  a  policy  which  the  bank  had  to 
adopt,  on  account  of  its  relations  to  the  companies  which 
dominated  the  syndicate.  There  are  no  coal  deposits  of 
any  importance  in  the  district  which  are  not  held  by  the 
International  Exploration  Company,  nor  any  sites  to  be 
had  for  new  plants  or  for  extensions,  not  even  at  fanciful 
prices.  Furthermore,  for  a  long  time  most  of  the  ore  has 
had  to  be  imported  from  abroad.  Here,  again,  the  Ger- 
man banks  have  repeatedly  tried  to  procure  for  friendly 
industrial  interests  ore  mines  or  ore  deliveries  at  reasonable 
prices,  as,  for  example,  from  Sweden. 

In  the  same  fashion  the  banks  were  active  in  many  ways 
in  the  consolidations,  out  of  which  sprang  the  great 
"mixed"  works  that  to-day  dominate  the  Ruhr  district, 
though  some  of  these,  such  as  Krupp,  Bochumer  Verein, 
Phoenix,  Harder  Bergiverks-und-Hiittenverein,  and  the  Gute 
Hofjnungshutte,  were  founded  as  early  as  the  fifties.  In 
the  early  seventies  the  Dortmunder  Union,  which  enjoyed 
the  patronage  of  the  Disconto-Gesellschaft,  absorbed  the 


736 


The     German     Great     Banks 

Heinrichshutte  and  the  Neu-Schottland  works,  which  even 
then  were  mixed  works.  Similarly,  it  absorbed  the 
Strousberg  Works,  in  which  the  Disconto-Gesellschaft  was 
likewise  interested.  In  the  same  way  the  Westfdlische 
Union  and  the  Westfalischer  Drahtindustrie-Verein  ab- 
sorbed a  number  of  wire  works  of  this  district. 

The  part  played  by  the  banks  in  these  consolidations  had 
not  been  unimportant,  but  around  the  middle  and  toward 
the  end  of  the  seventies  their  services  were  called  in  on  a 
much  larger  scale.  The  iron  industry  was  then  in  a  state 
of  prostration,  and  for  years  not  even  the  Phoenix  and  the 
Bochumer  Union  paid  dividends.  The  Horder  Verein 
became  involved  in  great  difficulties,  and  both  the  Gute 
Hoffnungshiitte  and  the  Rheinische  Stahlwerke  had  to 
resort  to  a  heavy  reduction  of  their  capital.  The  West- 
falische  Union  was  saved  from  extinction  only  by  the 
assistance  of  banks  and  a  reorganization. 

In  Upper  Silesia  capitalist  production  did  not  begin  to 
make  progress  before  the  fifties,  and  even  then  its  advance 
was  slow.  For  the  most  part  the  land  and  the  iron  ores 
were  in  the  hands  of  the  large  feudal  landowners.  Here 
Borsig  was  the  pioneer  in  evolving  a  machine  factory 
into  enormous  mixed  steel  works  by  acquiring  or  erect- 
ing blast  furnaces  and  rolling  mills.  This  example  was 
followed  later  by  the  machine  factory  of  Hendschel  &  Son, 
in  Kassel.  In  the  seventies  the  Vereinigte  Konigs-und 
Laurahutte  and  the  Donnersmarck-Hutte  passed  out  of  the 
ownership  of  the  magnates,  who  continued,  however,  to 
hold  by  far  the  larger  proportion  of  the  iron  furnaces  and 
coal  mines.  With  the  aid  of  the  banks,  the  newly  ac- 
quired furnace  works  were  organized  as  stock  companies. 

90311°— ii 48  737 


National    Monetary     Commission 

In  the  same  manner  "pure"  rolling  mills  were  started,  as, 
for  instance,  the  Bismarckhutte. 

At  present  the  center  of  gravity  of  the  industry  in  Upper 
Silesia  is  not  in  its  iron  production,  but  in  its  output  of 
coal  and  coke.22  This  is  regulated  by  the  Upper  Silesian 
Coal  Convention  of  1890.  Of  the  total  product  approxi- 
mately two-thirds  is  sold  by  two  Berlin  firms,  Ccesar  Woll- 
heim,  intimately  connected  with  the  Dresdner  Bank,  and 
Emanuel  Friedlander  &  Co.,  closely  allied  with  the  Berliner 
Handels-Gesellschaft. 

In  this  district,  too,  it  is  scarcely  possible  to-day  to 
acquire  coal  mines  or  coal  fields.  Free  competition  has 
been  well-nigh  "banished  from  Upper  Silesia."23  Here 
the  mining  and  metallurgical  concerns  have  always  been 
mixed  works.  It  is  therefore  only  in  the  works  recently 
established  that  the  movement  toward  concentration  and 
combination  has  been  closely  interwoven  with  the  cartel 
movement.  The  concentration  and  cartel  movements 
have  been  on  a  smaller  scale  in  this  region  than  in  the 
Rhenish- Westphalian  district,  but  here,  too,  the  stimulus 
has  come  from  the  banks,  which  are  behind  the  different 
establishments.  Of  these  the  Borsig  Works  is  the  only 
undertaking  still  owned  privately. 

Of  the  concerns  established  in  recent  times  the  one 
deserving  special  mention  is  the  Upper  Silesian  Iron 
Manufacturing  Stock  Company  (Caro  Hegenscheidt) .  This 
company  developed  in  1887  out  of  the  Caro  Works,  and  is 
closely  related  to  the  Berliner  Handels-Gesellschaft.  In 
1899  it  absorbed  the  Upper  Silesian  Wire  Manufacturing 
Stock  Company,  from  which  it  had  hitherto  been  obliged 
to  purchase  25,000  tons  of  pig  iron.  Thereafter  it  was 

738 


The     German     Great    Banks 

able  to  obtain  its  pig  iron  more  cheaply,  for  the  wire  com- 
pany had  in  1888  contracted  for  the  entire  output  of  the 
Count  Henckel-Siemianowitz  Works  for  a  period  of  twenty 
years.  Since  1889  the  Upper  Silesian  Iron  Manufacturing 
Company  has  been  closely  allied  by  contract  with  the 
Oberschlesische  Eisenbahnbedarfs-Gesellschaft  (Upper  Sile- 
sian Railroad  Equipment  Company) ,  which  is  on  intimate 
terms  with  the  Breslauer  Disconto-Bank,  and  through  it 
with  the  Darmstadter  Bank.  This  equipment  company 
(the  so-called  Oberbedarfs-Gesellschaft)  in  turn  united  in 
1904  with  the  Huldchinsky  furnaces.  To  all  appearances 
the  alliance  was  made  for  purely  business  and  technical 
reasons,  and  did  not  call  for  any  significant  help  from  the 
banks.  Similar  business  policies  and  technical  reasons 
seem  to  have  been  the  determining  factors  in  bringing  about 
the  community  of  interest  in  1903  between  the  Bismarck- 
hiitte  and  the  Upper  Silesian  Iron  Manufacturing  Company, 
extended  in  1 904  so  as  to  include  the  Donnersmarck 
Bethlen-Falva  Hirtte. 

The  same  may  be  said  of  the  community  of  interest 
founded  in  1904  between  the  Konigs-und  Laurahutte  (with 
which  are  affiliated  the  banking  house  of  S.  Bleichroder 
and  the  Dresdner  Bank),  the  Upper  Silesian  Railway 
Equipment  Company  (Friedenshutte)  (closely  related  to 
the  Breslauer  Disconto-Bank  and  the  Darmstadter  Bank) , 
and  the  Kattowitzer  (Tiele-Winckler' sche)  Aktiengesell- 
schaft  fur  Bergbau-  und  Huttenbetrieb  (Marthahutte).  In 
such  cases  the  services  of  the  friendly  banks  often  take  but 
the  form  of  removing  obstacles  and  hindrances,  or  refrain- 
ing from  interference  when  the  interests  of  other  clients 
might  call  for  such  interference. 


739 


National    Monetary     Commission 

Occurrences  of  this  kind  are,  however,  to  be  regarded  as 
exceptional.  Moreover,  it  is  not  a  matter  of  chance  that 
they  have  happened  in  the  district  of  Upper  Silesia.  For 
here  there  was  little  room  for  banks  or  their  initiative  and 
assistance,  for  the  reason  that  the  land,  the  coal  mines, 
and  the  ore  rights  were  in  the  hands  of  feudal  owners,  and 
that  from  early  times  mixed  works  predominated. 

The  conditions  in  the  Saar  district  are  similar.  There 
the  family  ownership  of  the  iron  furnaces  by  the  Stumm, 
the  de  Wendel,  and  the  Rochling  families  held  back  bank 
domination,  which  usually  asserts  itself  in  connection 
with  stock  companies.  Furthermore,  here  the  Govern- 
ment was  in  control  of  the  coal,  and  the  entire  district 
gradually  became  dependent  on  Lorraine  for  its  coke  and 
ore.  More  and  more  it  is  becoming  clear,  in  all  essentials, 
that  the  fate  of  the  mining  and  metallurgical  industries  as 
a  whole  will  be  decided  not  in  Upper  Silesia  or  on  the  Saar, 
but  in  the  two  districts  in  which  primarily  the  great  banks 
are  contending  for  financial  control — the  Rhenish- West- 
phalian  and  the  Lorraine-Luxemburg  districts.  Between 
the  latter  and  the  former  there  are  close  connections. 
Largely  through  the  help  of  the  banks  the  Lorraine- 
Luxemburg  district  has  recently  attained  a  position  of 
more  dominating  importance,  its  extensive  ownership  of 
mines  in  the  Ruhr  section  giving  it  large  influence  also  in 
the  Rhenish- Westphalian  territory.  In  the  main  it  was 
the  mixed  iron  works  of  the  two  districts  which  were  able 
to  impose  their  will  upon  and  have  their  interests  taken 
care  of  by  a  syndicate  primarily  devoted  to  the  interests 
of  coal  at  the  time  when  the  second  coal  syndicate  was 
formed  (in  September,  1903).  Coal  had  to  yield  to  iron. 


740 


The     German     Great     Banks 

These  two  districts,  which  may  be  regarded  the  cap- 
ital seats  of  the  mining  and  iron  industries,  witness  at 
present  the  great  struggle  for  industrial  supremacy 
between  the  leading  mining  concerns  and  for  financial 
supremacy  between  the  leading  banks.  It  is  highly 
interesting  to  watch  the  turns  in  this  battle,  the  numer- 
ous ups  and  downs,  surprises,  and  combinations  which 
present  themselves  in  varied  and  exciting  array  to  the 
attentive  observer  as  the  contending  parties  maneuver 
and  clash  in  the  combat.  There  is  no  lack  of  either 
large  and  comprehensive  plans  or  of  scenes  of  petty 
jealousy  in  these  campaigns.  Here  a  great  part  is  played 
by  two  captains  of  industry  whose  power  is  constantly 
growing  in  the  two  opposing  camps  contending  for  mas- 
tery— August  Thyssen,  of  the  firm  of  Thyssen  &  Co.,  in 
Mulheim  on-the-Rhine,  and  Hugo  Stinnes,  of  the  firm 
of  Mathias  Stinnes,  of  Mulheim  on-the-Rhine.  Thus  far 
both  have,  as  far  as  possible,  pursued  the  policy  of 
maintaining  the  friendliest  relations  with  a  number  of 
banks  without  wedding  themselves  to  any  one. 

It  is  not,  however,  the  first  time  that  such  captains 
of  industry  have  played  the  leading  role  in  the  indus- 
trial evolution  of  Germany.  One  need  only  recall  the 
names  of  Strousberg  and  Friedrich  Grillo,  whose  enter- 
prises either  failed  or  were  dispersed  on  their  death  and 
were  liquidated  or  sold  by  the  Disconto-Gesellschaft. 
Part  of  the  Grillo  works  passed  into  the  hands  of  August 
Thyssen,  of  whom  we  shall  have  more  to  say  here.  The 
modest  steel  and  rolling  mill  of  Thyssen  &  Co.,  in  Mulheim 
on-the-Rhine,  founded  in  the  early  seventies,  has  gradually 
grown  into  the  very  important  Thomas  and  Martin  Steel 


741 


National    Monetary     Commission 

and  Rolling  Mills  of  that  firm.  It  annexed  first  the  Gewerk- 
schaft  Deutscher  Kaiser,  a  mine  and  furnace  company  in 
Bruckhausen-Hamborn,  and  developed  it  into  powerful 
mixed  steel  works  especially  noteworthy  for  its  highly  effi- 
cient blast  furnaces.  In  1903  the  latter  works  joined  the 
Rhenish- Westphalian  Pig  Iron  Syndicate.  The  two  es- 
tablishments employ  more  than  17,000  men  and  insure 
Thyssen  an  important  place  both  in  the  pig  iron  syn- 
dicate and  in  the  Steel  Works  Union. 

Thyssen  has  also  a  controlling  interest  in  the  Schalker 
Gruben-und  Huttenverein,  which  owns  large  coal  mines  and 
blast  furnaces  and  operates  the  largest  iron  foundry  in  ex- 
istence in  Germany.  He  also  controls  the  Victor  Mining 
Company,  which  was  organized  by  the  former  concern. 
In  Lorraine  he  owns  the  Minette  mines  and  holds  a  con- 
siderable interest  in  the  mixed  steel  works  of  the  Sambre 
et  Moselle  Mining  Corporation.  In  the  coal  territory 
his  control  is  even  wider  than  in  the  iron  region.  This 
is  due  as  much  to  the  extensive  coal  properties  of  the 
Gewerkschaft  Deutscher  Kaiser  as  to  his  large  interests 
in  the  Mulheim  Coal  Company  which  is  jointly  controlled 
by  him  and  Stinnes. 

With  Stinnes  he  shares  also  in  the  control  of  the 
Friedlicher  Nachbar  Mining  Company.  Early  in  1904 
he  joined  the  supervisory  board  of  the  Gelsenkirchner 
Bergwerksgesellschaft,  the  coal  properties  of  which  adjoin 
those  of  the  Schalker  Gruben-und  Hiittenverein,  having 
acquired  a  large  part,  perhaps  a  majority,  of  the  shares 
of  that  company,  either  individually  or  through  the 
Mulheimer  Bergwerksverein  (3,000,000  marks).  Finally, 
in  1903,  he  acquired  the  development  company  Bohrge- 


742 


The     German     Great     Banks 

sellschaft  Lippermulde  and  thereby  extended  and  rounded 
out  his  coal  properties,  until  they  reached  on  the  east 
of  the  Rhine  as  far  as  the  government  mines  and  on 
the  south  as  far  as  the  properties  of  the  Gewerkschajt 
Deutscher  Kaiser  and  Gute-Hoffnungshutte.  After  the  pur- 
chase of  the  development  company  Tiefbohrgesellschaft 
Lubisch  his  holdings  extended  east  of  the  Rhine  as  far 
north  as  the  Dutch  border.  His  present  ownership  of 
coal  properties  is  about  twice  as  large  as  that  of  the 
Government  in  the  same  region. 

While  Stinnes  is  closely  allied  with  Thyssen,  as  is 
evident  from  the  above,  and  owns  jointly  with  him  the 
Mulheimer  and  the  Sambre  et  Mosselle  mining  compa- 
nies, he  owns  also  in  his  own  right  the  coal  mines  Ma- 
thias  Stinnes,  Victoria  Mathias,  Graf  Beust,  Carolus 
Magnus,  Friedrich,  and  Ernestine.  He  owned  also  the 
Friedlicher  Nachbar  mine  (transferred  in  1904  to  the 
Deutsch-Luxemburgische  Bergwerks-und  Huttenaktiengesell- 
schaft).  In  the  southern  part  of  the  Ruhr  district  he 
is  almost  in  sole  control;  in  the  rest  of  this  territory 
he  shares  control  with  Thyssen.  Stinnes  likewise  joined 
the  supervisory  board  of  the  Gelsenkirchener  Bergwerks- 
gesellschaft.  In  addition  he  is  on  the  board  of  the  Nord- 
stern  and  of  the  Mittelrheinische  Bank  in  Koblenz  and 
Duisburg.  The  latter  is  closely  related  to  Spaeter  &  Co., 
in  Koblenz. 

The  supremacy  of  Thyssen  and  Stinnes  in  the  Ruhr 
district  is  disputed  in  the  main  only  by  the  Haniel  family 
and  by  Karl  Funke,  of  Essen.  The  Haniel  family  owns 
the  Rheinpreussen  Mines  and  the  Gute  Hoffnungs  Mines, 
adjoining  the  Thyssen  coal  mines.  Karl  Funke  owns  the 


743 


National     Monetary     Commission 

Konig  Ludwig  mines.  The  Haniel  family  is  allied  with 
the  Duisburg-Ruhrorter  Bank,  and  Funke  with  the  Essener 
Bankverein.  As  both  of  these  banks  have  communities 
of  interest  with  the  Deutsche  Bank,  both  Haniel  and 
Funke  are  now  in  close  touch  with  the  Deutsche  Bank. 
Stinnes's  relations  with  the  firm  of  Spaeter  &  Co.,  of 
Koblenz,  are  particularly  close  through  their  common 
shipping  interests  on  the  Rhine,  both  of  them  being 
large  river  carriers  of  coal. 

In  some  cases  both  Thyssen  and  Stinnes  have  been 
fighting  the  syndicates.  In  the  majority  of  cases,  how- 
ever, their  attitude  toward  them  was  more  friendly, 
resembling  their  attitude  toward  the  banks,  maintained 
successfully  for  a  number  of  years. 

From  the  beginning  the  Schalker  Gruben-und  Hutten- 
verein  controlled  by  Thyssen,  was  a  member  of  the 
Rhenish-Westphalian  Pig  Iron  Syndicate,  while  his 
Gewerkschaft  Deutscher  Kaiser  with  its  blast  furnaces 
did  not  join  this  syndicate  until  1903.  The  Schalker 
Verein  with  its  Pluto  mines,  and  its  subsidiary  company 
Victor,  as  well  as  the  Mulheimer  Bergwerksverein,  in 
which  Stinnes  was  also  interested,  were  members  of  the 
coal  syndicate,  while  at  the  same  time  Thyssen's  Deut- 
scher Kaiser  mines  were  most  active  in  fighting  the 
syndicate. 

Stinnes,  on  the  contrary,  joined  the  coal  syndicate 
with  nearly  all  his  mines.  However,  he  kept  outside  of 
the  syndicate  his  Friedlicher  Nachbar  mines.  The  intoler- 
able conditions  thus  produced  have,  however,  in  the 
main,  been  ended  by  the  syndicate  regulations. 


744 


T h  e     Germ  an     Great     Banks 

Their  relations  to  the  banks  we  have  characterized 
before.  Thus  Thyssen  was  at  first  on  close  terms  with 
the  Disconto-Gesellschaft.  Particularly  in  the  eighties 
and  nineties  it  was  this  bank  which  floated  the  securities 
of  the  Schalker  Gruben-  und  Huttenverein  and  of  the 
Gewerkschaft  Deutscher  Kaiser.  Later  his  relations  be- 
came intimate  with  the  Dresdner  Bank,  after  it  had 
reorganized  in  1902  and  entered  into  a  community  of 
interest  with  the  Rheinische  Bank  in  Mulheim,  an  insti- 
tution with  which  Thyssen  was  affiliated. 

Hugo  Stinnes  had  some  relations  with  the  Dresdner 
Bank,  having  participated  with  it  in  the  reorganization 
of  the  Saar-  und  Moselle  Mining  Company.  He  estab- 
lished relations  also  with  the  A.  Schaaffhausen'scher  Bank- 
verein,  after  the  latter  had  founded  a  community  of  in- 
terest with  the  Mittelrheinische  Bank  in  Koblenz,  of 
which  Stinnes  was  a  board  member.  In  1901  Stinnes 
established  relations  also  with  the  Darmstadter  Bank, 
when  he  became  vice-president  of  the  board  of  the 
Deutsch-Luxemburgische  Bergiverks-  und  Hutten-Aktien- 
Gesellschaft,  which  owes  its  financial  strength  and  high 
technical  standing  to  the  Darmstadter  Bank.  The  con- 
cern combined  both  mining  and  smelting  operations 
after  the  acquisition  in  1904  of  the  Stinnes  mines, 
Friedlicher  Nachbar. 

On  January  i,  1905,  a  community  of  interest  was 
entered  into  between  the  Gelsenkirchener  Bergwerks- 
Aktiengesellschaft,  the  Aachener  Huttenverein  Rote  Erde 
and  the  Thyssen  concern  Schalker  Gruben-  und  Hutten- 
verein.  By  this  step  a  group  of  competing  banks,  viz, 


745 


National    Monetary     Commission 

the  Disconto-Gesellschaft,  the  Deutsche  Bank,  the  Dresd- 
ner  Bank  and  the  A.  Schaaffhausen'scher  Bankverein 
were  brought  together  in  a  joint  undertaking,  This  event 
served  also  to  enhance  the  power  of  Hugo  Stinnes  and 
August  Thyssen,  who  became  members  of  the  "  joint 
committee"  of  this  community  of  interests. 

This  combination  seems  to  have  brought  about  some 
sort  of  equilibrium  in  the  Rhenish- Westphalian  indus- 
trial territory,  and  simplified  certain  complex  relation- 
ships in  the  banking  and  industrial  field.  On  the  other 
hand,  there  are  already  evident  the  beginnings  of  new 
conflicts  in  another  field. 

As  we  saw,  the  Lorraine-Luxemburg  iron  industry  has 
in  recent  times  been  coming  to  the  front  more  and  more 
and  is  beginning  to  overshadow  even  the  Rhenish- West- 
phalian industry.  One  reason  of  this  development  is  the 
far  lower  cost  at  which  it  can  produce  pig  iron  as  com- 
pared with  the  Rhenish- Westphalian  district.  Another 
reason  is  that  owing  to  the  electrical  process  recently 
introduced  in  the  manufacture  of  steel  the  value  of  Luxem- 
burg-Lorraine ores,  which  formerly  were  hard  to  work, 
because  they  were  rich  in  phosphorus,  has  been  greatly 
enhanced.  These  can  be  utilized  most  cheaply  and 
advantageously  by  the  works  located  close  to  the  ore 
beds.24  The  quantity  of  such  ore  is  estimated  at  about 
2,000,000,000  tons. 

Realizing  that  a  serious  movement  of  the  German  pig 
iron  industry  toward  the  southwest  has  set  in,  the  leading 
captains  of  industry  and  the  leading  banks  alike  have 
felt  obliged  to  increase  their  influence  in  the  Lorraine- 
Luxemburg  region. 


746 


The     German     Great     Banks 

In  this  territory  the  position  of  the  firm,  Spaeter  &  Co., 
in  Koblenz,  is  very  powerful.  It  is  the  founder  of  the 
Rombacher  Huttenwerke,  which  have  bought  up  the  Mosel- 
huttenwerke  and  dominate  the  blast  furnaces  in  Rodingen, 
Rumelingen,  and  the  Eisenhuttenaktienverein  Dudelingen. 
In  this  district  Thyssen  has  thus  far  gained  a  foothold 
practically  only  through  his  interest  in  the  Huttenverein 
Sambre  et  Moselle,  while  Stinnes's  hold  in  this  territory  is 
only  through  his  membership  in  the  Supervisory  board  of 
what  is  now  a  very  important  company — the  Deutsch- 
Luxemburgische  Bergwerks-  und  Hutten-Aktiengesellschaft, 
and  his  rather  unimportant  connection  with  Spaeter  &  Co.25 
As  recently  as  April,  1909,  a  step  was  taken  which  is  certain 
to  affect  deeply  the  relations  of  the  different  industrial 
groups  and  their  relative  positions.  In  all  likelihood  it 
will  also  exert  a  powerful  influence  on  the  relations  of  the 
different  bank  groups  which  are  dependent  on  these 
industrial  groupings,  and  on  the  general  movement 
toward  concentration.  An  enormous  increase  was  made 
in  the  capitalization  of  the  Gelsenkirchener  Bergwerks- 
Gesellschaft.  Its  capital  stock  was  increased  by 
26,000,000  marks  to  a  nominal  amount  of  156,000,000 
marks,  and  its  bonded  debt  by  20,000,000  marks  to 
70,000,000  marks.  The  latter  increase  was  made  in 
spite  of  the  fact  that  there  was  still  available  an 
unissued  amount  of  9,325,000  marks  in  4  per  cent  bonds 
authorized  in  1906. 

This  move  attracted  attention  not  only  by  the  size  of 
the  capital  increase  but  also  because  it  was  made  at  a 
time  of  money  stringency  and  unfavorable  market  condi- 
tions. The  company  justified  this  step  on  the  ground  that 


747 


National    Monetary     Commission 

the  additional  resources  were  indispensable  for  the  erection 
of  new  blast  furnaces  and  steel  works  in  Esch  and  in 
Deutsch-Oth.  It  was  also  given  out  officially  that  the 
measure  was  necessary  to  insure  an  "adequate  position" 
for  the  company  in  case  the  Steel  Works'  Union,  which  ter- 
minates June  30,  1912,  were  not  renewed.  Doubtless  this 
had  reference  to  an  increase  of  its  quota  in  the  syndi- 
cate. The  Gelsenkirchener  Bergwerksgesellschaft  had 
originally  been  a  producer  of  coal  and  coke  only.  After 
it  had  entered  into  a  community  of  interest  with  the 
Rote  Erde  and  the  Schalke  Works  it  became  also  a  pro- 
ducer of  pig  iron,  steel,  semimanufactures  of  iron  and 
steel,  beams  and  rails,  but  it  nevertheless  continued 
to  hold  the  largest  production  quota  in  the  coal  syndicate. 
Through  its  action  of  April,  1909,  however,  it  entirely 
shifted  its  center  of  gravity  away  from  the  production  of 
coal  to  that  of  iron  and  steel. 

This  step  was  in  keeping  with  the  movement  of  the  iron 
industry  to  the  southwest.  The  new  resources  were  to 
be  expended  for  the  purpose  of  operating  its  steel  and 
rolling  mills  in  combination  with  its  blast  furnaces,  where 
conditions  made  possible  the  cheapest  cost  of  production, 
i.  e.,  in  the  heart  of  the  Lorraine-Luxemburg  Minette 
district,  where  it  owned  extensive  ore  beds. 

Through  this  action,  however,  the  Gelsenkirchener 
Bergwerksgesellschaft  became  a  direct  competitor  of 
August  Thyssen,  who  had  been  a  member  of  its  board. 
He  at  once  accepted  the  logical  consequence  of  the  situa- 
tion and  resigned  from  the  board.  Earlier  he  had  with- 
drawn also  from  the  board  of  the  Phoenix.  The  Thyssen 


748 


The     German     Great     Banks 

concern  Deutscher  Kaiser  owns  very  important  ore  rights 
in  the  Lorraine-Luxemburg  district,  and  he  himself,  as 
was  shown  above,is  interested  in  the  Saar-  und  Moselberg- 
-werksgesellschaft  in  Karlingen.  Moreover,  early  in  1909 
he  invested  several  million  marks  in  land  in  this  section 
and  acquired  the  oatent  rights  to  produce  electro-steel  in 
all  his  works. 

In  the  near  future  the  struggle  for  supremacy  is  likely 
to  be  fought  out  in  the  Lorraine-Luxemburg  district. 
The  trial  of  strength  between  the  leading  interests  will 
come  as  soon  as  negotiations  begin  with  a  view  to  renew- 
ing the  Steel  Works'  Union  at  the  expiration  of  the  pres- 
ent agreement. 

The  progress  of  the  conflict  and  its  outcome  and  the 
industrial  concentration  that  is  likely  to  precede  or  follow 
it  will  undoubtedly  be  influenced  by  the  banks  and  groups 
of  banks  that  stand  back  of  the  captains  of  industry  and 
their  enterprises.  This  influence  may  indeed  not  be  de- 
cisive, but  it  is  likely  to  be  in  the  direction  off  new  com- 
binations and  the  avoidance  of  further  conflicts  which 
must  prove  harmful  to  all.  So  far  as  we  can  foresee,  the 
important  part  will  be  taken  by  those  banks  which  now 
possess,  or  by  that  time  will  have  attained,  a  controlling 
influence  over  the  industrial  concerns  which  dominate  the 
Lorraine-Luxemburg  district.  It  will  be  of  the  utmost 
interest  to  watch  further  developments.  These  will 
reveal  many  different  combinations  and  changes  in  indus- 
trial and  banking  concentration,  and  new  group  align- 
ments in  both  fields. 


749 


National    Monetary     Commission 

III.  THE  INFLUENCE  OF  INDUSTRY  AND  INDUSTRIAL  CON- 
CENTRATION ON  CONCENTRATION  IN  BANKING. 

A  detailed  account  of  the  tremendous  effects  which 
industrial  development  and  concentration  have  exerted 
on  the  growth  of  the  great  banks  and  on  concentration  in 
banking  would  involve  a  repetition  of  practically  every- 
thing discussed  in  previous  chapters  of  this  book.  At 
every  step  in  the  development  of  the  banks  and  at  every 
stage  of  their  growth  the  mighty  influence  of  industrial 
progress  may  be  seen.  We  showed  this  connection  par- 
ticularly in  discussing  the  current  business  of  the  banks 
as  well  as  their  activity  in  the  field  of  floating  securities, 
forming  new  corporations,  and  converting  firms  into 
corporations.  This  influence  is  equally  apparent  in  the 
activities  of  the  banks  both  at  home  and  abroad. 

The  far-reaching  influence  of  the  cartel  movement  in 
industry  and  of  the  national  export  policy  on  the  extent 
and  the  rapidity  of  the  movement  of  concentration  in 
banking,  also  the  ways  in  which  concentration  in 
banking  was  brought  about  and  the  forms  it  assumed, 
have  been  shown  in  great  detail.  The  reader  is  therefore 
referred  to  the  previous  chapters  for  an  account  of  these 
subjects. 


75° 


PART  VI.  THE  SITUATION  RESULTING  FROM 
CONCENTRATION;  ADVANTAGES  AND  DAN- 
GERS OF  CONCENTRATION— THE  OUTLOOK 
FOR  THE  FUTURE. 

By  far  the  most  serviceable  of  the  tools  employed  by 
modern  capitalism  have  been  first  the  machine  and  second 
the  corporation.  Machinery  made  possible  the  elimina- 
tion of  the  personal  element  of  labor  and  the  utmost  con- 
centration of  mechanical  forces.  The  corporation  elimi- 
nated the  personal  element  of  the  entrepreneur,  and  led 
to  the  utmost  concentration  of  the  forces  of  capital. 

The  cooperation  of  these  two  factors,  i.  e.,  machine  pro- 
duction and  the  corporation,  has  made  possible  the 
culmination  of  capitalist  development  in  the  shape  of  cen- 
tralized management  of  combined  forces  and  enterprises. 

The  abundance  and  variety  of  detail  revealed  in  the 
history  of  the  development  of  concentration  may,  on 
superficial  observation,  fill  one  with  dismay.  On  closer 
inspection  we  find,  however,  that  the  successive  stages  of 
this  development  are  subject  to  remarkable  regularity, 
partaking  almost  of  the  character  of  natural  law. 

At  first  sight  there  is  a  confused  mass  of  complicated 
events,  so  intricately  interlaced  that  it  seems  impossible 
to  grasp  them  in  their  entirety.  Upon  closer  examination 
three  stages  of  development  become  discernible.  In  the 
first  stage  we  find  a  large  number  of  weak,  independent 
enterprises,  incapable  of  much  resistance.  In  the  second 
stage  we  notice  the  transition  to  a  large  number  of  far 

751 


National    Monetary     Commission 

more  complicated  enterprises,  better  organized  and  capable 
of  greater  resistance.  In  the  third  stage  we  have  the 
situation  again  simplified  by  the  formation  of  a  small 
number  of  powerful  groups  of  enterprises. 

In  the  economic  struggle  for  existence,  as  shown  in  the 
movement  toward  industrial  concentration,  we  see  first  a 
large  number  of  weak  individual  establishments.  Out  of 
these  by  a  thousand  devices  and  in  seemingly  roundabout 
ways,  and  through  as  many  types  and  forms,  there 
emerges  gradually  the  fewest  practicable  number  of  strong 
and  unified  groups  of  enterprises,  i.  e.,  increasingly  simple 
industrial  formations. 

This  process  of  evolution  can  be  traced  in  every 
domain  of  industry.  In  the  most  modern  of  industries, 
the  electrical  industry,  the  process  is  revealed  most 
clearly.  At  the  outset  numerous  companies  were  organ- 
ized in  feverish  haste.  By  1900,  as  we  saw  (p.  715  et  seq.) , 
there  had  developed  out  of  them  seven  groups,  which 
dominated  the  field,  comprising  in  all  28  allied  companies. 
After  some  of  these  groups  had  lost  much  of  their  power 
and  others  had  been  absorbed,  two  groups  remained  more 
powerful  than  the  others — the  Siemens-Schuckert  group 
and  the  General  Electric  (A.  E.  G.).  From  present  indi- 
cations these  will  be  able  to  ally  with  themselves  the  re- 
maining groups  or  companies  either  through  price  agree- 
ments or  by  more  efficient  means.  They  will  also  be  in  a 
position  to  hold  in  check  international  competition  by 
means  of  mutual  understandings,  the  beginnings  of  which 
may  be  seen  even  at  present. 

In  the  chemical  industry  we  see  the  same  development. 
There  is  on  the  one  side  the  union  of  the  Hochst  Dye 


752 


The     German     Great    Banks 

Works  and  the  firm  of  Leopold  Cassella  &  Co.  in  the  form 
of  a  community  of  interest,  and  on  the  other  a  similar 
community  of  interest  among  the  Badische  Anilin-und 
Sodafabrik,  the  dye  works  formerly  Friedrich  Bayer  &  Co., 
and  the  Aktiengesellschaft  fur  Anilinfabrikation.  These 
are  in  a  position  to  bring  about  a  consolidation  of  all 
the  remaining  dye  works,  as  far  as  it  may  become  neces- 
sary, and  to  enable  the  German  aniline  dye  industry  to 
meet  successfully  foreign  competition. 

In  the  mining  and  metallurgical  industry  a  light  has  ap- 
peared in  the  darkness  of  the  "cartel  chaos"  since  the 
organization  of  the  Steel  Works'  Union.  The  latter  com- 
bines establishments  engaged  in  every  stage  of  the  process 
of  production.  It  is,  therefore,  in  a  better  position  to 
carry  out  a  sound  cartel  policy  at  home  and  to  arrange  for 
the  elimination  of  international  competition  by  bringing 
about  agreements  for  a  division  of  the  export  trade  to  im- 
portant foreign  markets  among  the  competing  countries 
on  the  basis  of  the  amount  of  their  past  sales  in  these 
markets.  Meanwhile,  more  rapidly  than  ever,  there  is 
going  on  in  the  mining  and  iron  industries  a  movement  of 
concentration  and  consolidation  among  the  different 
groups  of  enterprises,  and  in  this  process  the  weaker  and 
smaller  establishments  are  being  absorbed  or  eliminated. 

The  shipping  industry  is  dominated  by  two  companies, 
the  Hamburg-American  Packet  Line  Company  and  the 
North  German  Lloyd.  These  are  united  by  agreement 
between  themselves  and  also  with  a  British  -  American 
combination. 

Finally,  in  banking,  out  of  a  large  number  of  independ- 
ent banks,  there  have  been  developed  five  powerful  groups, 


90311°— ii 49  753 


National    Monetary     Commission 

comprising,  in  all,  41  "concern"  banks  (Konzernbankeri) . 
In  this  field,  however,  the  process  of  concentration  has  by 
no  means  yet  ended.  It  will,  in  all  probability,  not  stop 
until  it  has  come  nearer  its  goal  than  to-day,  by  develop- 
ing the  smallest  number  of  bank  groups  practicable,  each 
embracing  the  largest  possible  number  of  "concern" 
banks,  under  centralized  management.  Until  the  groups 
of  banks  shall  have  reached  a  point  of  fairly  equal  strength, 
so  that  each  one  will  respect  the  other's  domain,  we  can 
not  look  to  a  halt  in  the  movement  of  concentration. 
However,  even  now  it  is  possible  to  realize  many  of  its 
advantages  and  dangers. 

To  begin  with  the  advantages  of  concentration.  Un- 
questionably the  business  policy  of  a  great  bank,  and  not- 
ably of  one  standing  at  the  head  of  a  chain  of  banks  (Kon- 
zernbankeri) ,  can  and  will  be  carried  out  more  in  accordance 
with  a  uniform  program,  which  takes  into  account  the  gen- 
eral economic  interests  including  those  of  the  nation  and 
of  the  Government.  Such  a  business  policy  can  be  pursued 
by  it  much  more  readily  than  by  a  moderate-size  or  small 
bank  or  by  a  large  number  of  small  scattered  banks,  which 
are  compelled  by  the  increasing  struggle  for  existence  to 
shape  their  policy  merely  with  a  view  to  dividends.  Ex- 
perience has  taught  that  the  great  German  banks  realized 
the  necessity  of  supporting  a  vigorous  policy  in  encourag- 
ing the  exports  of  manufactures  (see  p.  527  et  seq.).  They 
accepted  the  logical  demands  of  the  situation  and  acted 
accordingly,  as  shown  by  their  attitude  toward  industry 
and  the  export  trade,  the  investment  of  German  capital  in 
foreign  commercial  and  industrial  enterprises  and  securi- 
ties1, and  in  promoting  actively  the  national  policies  in 


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The     German     Great     Banks 

regard  to  shipping,  colonies,  the  building  of  canals,  and 
the  laying  of  cables. 

Neither  will  it  be  denied  that  the  administration  of  the 
great  German  banks  is  far  more  subject  to  control  by  the 
special  press  and  the  public  than  a  large  number  of 
isolated  small  or  moderately  large  banks.  Furthermore, 
it  is  clear  that  powerful  banks  and  groups  of  banks  of  this 
kind,  under  centralized  control,  can  serve  the  German  Em- 

A 

pire  as  one  of  its  most  potent  agencies  in  both  its  economic 
and  world  policies.  This  is  true,  at  least  so  long  as  the 
leaders  of  the  banks  continue,  as  they  have  done,  to  regard 
their  duty  to  the  state  as  one  of  their  important  obligations. 

The  Government  and  its  various  organs,  moreover,  regard 
it  as  a  great  help  to  carry  on  negotiations  with  a  few  great 
banks,  having  their  center  in  Berlin,  when  it  is  a  question 
of  measures  the  execution  of  which  is  to  be  intrusted  to 
private  capital,  or  such  as  require  haste  or  confidential 
treatment,  or,  as  in  the  case  of  cable  lines  or  colonial  en- 
terprises, such  as  necessitate  the  tying  up  of  large  amounts 
of  capital  for  a  considerable  period. 

Greater  concentration  of  banking  capital  facilitates  a 
more  elastic  extension  of  credit  by  eliminating  to  a  large  ' 
extent  reckless  granting  of  credit,  on  the  one  hand,  and 
"panic  sales"  (Angstverkdufe) ,  on  the  other.  Through 
their  better  knowledge  of  the  general  economic  and 
financial  situation  the  great  banks  are  often  able  to 
prognosticate  the  approach  of  industrial,  commercial, 
and  bourse  crises.  While  powerless  to  ward  off  such 
crises,  they  may,  by  timely  warnings  and  preventive 
measures,  lessen  the  effects  and  duration  of  the  calamity. 
Concentration  of  banking  carries  with  it  also  the 


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National    Monetary     Commission 

extension  of  check,  giro,  and  clearing  operations — i.  i., 
those  factors  which  lessen  the  need  of  cash  for  payments, 
and  thus  broaden  the  basis  for  credit  transactions. 

In  turn,  concentration  results  in  a  number  of  important 
advantages  to  the  private  economic  interests  of  the 
banks.  This  is  true  alike  of  that  form  of  concentration 
which  is  attained  through  control  of  other  enterprises  or 
the  creation  of  communities  of  interest  (through  the  acqui- 
sition of  stock,  the  establishment  of  subsidiary  companies, 
and  trust  companies,  through  agreement  or  the  inter- 
change of  stock) ,  as  of  the  other  form  attained  by  means 
of  decentralization  of  operations  through  the  establishment 
of  commandites,  branches,  agencies,  and  deposit  offices. 

All  these  forms  of  concentration  of  capital  and  power 
secure  to  the  central  institution  a  more  complete  view 
of  the  general  industrial  situation  and  of  the  varying  needs 
and  conditions  in  the  different  branches  of  industry,  and 
a  detailed  knowledge  of  the  financial  standing  of  a  large 
number  of  clients,  their  trustworthiness  in  general,  and 
with  regard  to  credit  in  particular.  This  information  is 
based  on  the  objective  expert  advices  of  reporting  agen- 
cies which  are  thoroughly  familiar  with  local  conditions 
and,  on  the  other  hand,  intimately  related  to  the  central 
institution  and  acting  in  its  interests.  From  such  a  com- 
prehensive and  accurate  survey  of  the  general  situation 
and  the  detailed  information,  the  central  institution  derives 
in  an  ever-increasing  manner  the  following  advantages: 

(a)  It  is  able  to  find  a  wider  and  safer  market  for  the 
sale  of  securities  which  it  proposes  to  float.  It  can,  there- 
fore, acquire  such  securities  on  a  larger  scale  and  with 
greater  confidence,  knowing  beforehand  that  such  securi- 
ties will  go  into  good  hands  as  permanent  investments, 


756 


T  h  e     German     Great    Banks 

and  not  be  thrown  back  at  once  upon  the  market,  to  be 
taken  up  again  by  the  bank. 

(6)  Its  current  banking  business  is  extended.  This 
extension  usually  means  increased  dividends.  This  leads 
to  the  enhancing  of  its  own  credit  both  at  home  and 
abroad,  particularly  of  its  acceptance  credit.  It  also 
means  greater  power  of  intervention  in  critical  times  and 
larger  freedom  of  action  in  the  money  market. 

(c)  Its  deposit  business  is  increased  in  proportion  as 
those  of  its  clients,  who  belong  to  the  class  of  small  capi- 
talists and  tradesmen,  are  becoming  accustomed  to  leave 
on  deposit  with  the  bank  even  small  amounts  of  available 
funds  to  be  applied  to  productive  uses.     In  this  way  a 
stimulus  is  afforded  to  such  clients  to  save  and  accumulate 
reserves — which  is  highly  desirable  from  the  point  of  view 
of  business — and  to  turn  over  to  the   bank  the  receiv- 
ing and  making  of  payments  on  their  account  (geordnete 
Kassenfuhrung) .     The  effect  of  this   development  is   an 
improvement  of  conditions  attending  settlements  by  the 
more  extensive    and   intensive    use    of    checks.    Credit 
transactions  are  facilitated,    the  circulation  of   cash    is 
diminished,  the  bank's  freedom  of  action  is  increased,  and 
its  dividends  become  more  stable. 

(d)  The  bank  is  enabled  to  furnish  its  clients  with 
reliable  information  and  to  help  them  in  every  way  in  their 
business   undertakings,   especially   with  regard  to   bills, 
foreign  exchange,  and  payments. 

As  against  these  advantages,  the  movement  of  concentra- 
tion in  Germany 2  has  thus  far  not  brought  with  it  a  reduc- 
tion of  the  cost  of  conducting  business  or  of  the  expenses 
of  administration,  such  as  was  often  the  case  when 
foreign  trusts  and  analogous  combinations  were  formed. 


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National    Monetary     Commission 

One  reason  for  this  lies  in  the  fact  that,  unlike  the 
situation  produced  where  trusts  were  formed,  the  inde- 
pendence of  the  original  establishments  was  maintained, 
except  in  case  of  mergers.  As  a  result,  there  could  hardly 
be  any  saving  in  the  cost  of  operation  or  administration. 

On  the  contrary,  we  were  able  to  show  (on  p.  467  et 
seq.)  that  as  a  general  rule  both  the  absolute  amounts  of 
expenses  of  operation  and  the  percentage  of  expenses  to  gross 
profits  have  steadily  risen  among  the  banks  that  have  been 
in  the  forefront  in  the  movement  toward  concentration.3 
Jorgens  has  pointed  out  the  increase  in  taxes,  due  to  the  per- 
manent ownership  of  stock  in  one  corporation  by  another.4 

Attention  has  also  been  called  to  the  various  dangers 
arising  from  concentration  in  banking.  With  reference  to 
this  subject  the  following  points  may  be  made:  Thus  far 
there  has  been  no  manifestation  of  a  monopolistic  ten- 
dency, as  regards  the  treatment  of  the  public  in  the  so-called 
current  business,  and  this  in  spite  of  what  would  seem 
to  be  the  natural  tendency  in  view  of  the  extent  to  which 
concentration  has  gone.  On  the  contrary,  in  their  competi- 
tion the  banks  have  undertaken  the  greatest  services  and 
responsibilities  for  the  lowest  commissions  ever  known  in 
German  banking,  commissions  so  slight  as  to  fall  below 
the  point  of  fair  remuneration.  On  the  other  hand,  there 
are  unmistakable  signs  of  such  tendencies  in  the  com- 
petitive struggle  against  private  bankers;  also  within  the 
domain  of  underwriting  and  of  tenders  for  the  taking  over 
of  public  loans  or  of  securities  of  public  or  private  under- 
takings. As  we  saw  before  (p.  407  et  seq.),  outside  compe- 
tition in  this  field  may  occasionally  underbid  the  tenders 
of  large  banks  or  groups  of  banks,  but  must  fail  in  the  long 


758 


The     German     Great    Banks 

run  unless  it  is  in  a  position  to  offer  the  same  security  for 
making  payment,  for  taking  over  the  securities,  or  for  carry- 
ing out  the  undertaking.  Many  of  the  syndicates  in  this 
field  have  been  in  the  nature  of  price  conventions  and 
have  often  assumed  a  monopolistic  character. 

It  is,  furthermore,  undeniable  that  concentration  in 
German  banking  has  been  accompanied  by  marked  injury 
to  the  sound  and  vigorous  elements  among  the  class  of  the 
smaller  private  bankers.  I  am  convinced  that  even  to- 
day, as  I  shall  show  further  on,  this  class  performs  eco- 
nomically useful  and  even  necessary  functions,  and  that 
the  decline  of  the  private  banker  class  represents  one  of 
the  dark  sides  of  the  progress  of  concentration.  As  we 
saw  (p.  618  et  seq.),  the  decline  of  this  class  was 
hastened  and  intensified  by  faulty  stock  exchange  and 
stamp-tax  legislation;  essentially,  however,  it  was  due  to 
the  movement  of  concentration. 

It  may,  indeed,  be  said  that  the  decline  of  private  bank- 
ing,which  showed  itself  in  very  acute  form  before  the  passing 
of  the  supplementary  bourse  act,  is  only  one  phase  of  the 
modern  struggle  for  existence,  which  had  its  origin  in  the 
capitalist  system,  and  will  come  to  an  end  only  with  the 
triumph  of  large-scale  enterprise  and  concentration.  It  is 
part  of  the  same  conflict  in  which,  it  seems,  the  small 
farmer  and  the  small  miller  are  succumbing  before  the  large 
landowner  and  large  miller,  the  craftsmen  and  the  home  in- 
dustries before  the  factory,  the  retail  store  before  the  large 
dealer  and  particularly  before  the  department  store.  How- 
ever, in  the  other  branches  of  industrial  life  it  has  been 
policy  to  protect  the  middle  class  in  every  possible  way  the 
and  to  prevent  its  decline.  Where  this  was  manifestly 


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National    Monetary     Commission 

unavoidable,  the  effort  has  been  to  retard  it  and  to  miti- 
gate its  effects,  so  as  to  allow  those  injured  gradually  to 
change  their  economic  position  and  to  prepare  them  to 
face  the  new  problems  presented  by  the  altered  situation. 
In  the  attitude  taken  toward  the  middle  class  and  small 
banker  an  opposite  policy  was  apparently  followed  both  in 
the  various  provisions  of  the  bank-deposit  law  and  in  the 
stock  exchange  and  the  imperial  stamp-tax  legislation. 
(See  p.  618  et  seq.)  As  a  result  of  these  measures  the 
rapidity  of  the  concentration  movement  was  greatly 
enhanced  and  the  situation  resulting  from  this  tendency 
was  made  much  harder  for  the  private  banker.  What  is 
even  worse,  the  vitality  of  this  class  was  regrettably  low- 
ered. There  seems,  however,  to  be  no  good  reason 
why  the  decline  of  private  banking  should  have  been 
permitted  to  assume  the  proportions  that  it  really  did. 

There  are  to-day,  as  much  as  ever,  certain  necessary 
and  legitimate  economic  functions  for  the  smaller  banker, 
and  there  is  still  a  broad  field  of  profitable  activity  open 
to  him.5  The  situation  here  is  similar  to  that  among 
the  handicrafts,  where  the  reasons  for  the  decay  are 
similar.6  The  latter  can  maintain  themselves  where 
the  bond  between  producer  and  consumer  is  not  dis- 
solved and  where  local  or  individual  adaptation  is  still 
necessary.7  In  the  same  way  the  small  banker  can 
hope  to  compete  successfully  wherever  he  may  operate,  if 
he  will  adopt  from  the  outset  as  his  motto  in  business 
specialization  and  adaptation  to  local  conditions  and 
needs.  He  has  here  an  advantage  over  the  decentralized 
banks  in  the  fact  that  his  expenses  of  operation  are  rela- 
tively smaller.  Such  specialization  has  already  set  in 


760 


The     German     Great     Banks 

in  several  fields,  although  it  is  not  of  a  kind  altogether 
desirable,  in  case,  for  instance,  the  smaller  bankers  devote 
themselves  particularly  to  the  purchase  and  sale  of  mining 
stocks  or  unlisted  securities. 

The  primary  and  normal  function  of  the  small  banker 
will  always  continue  to  be  that  of  adviser  to  the  large 
public  in  their  financial  affairs  in  general,  and  more  par- 
ticularly in  the  matter  of  investments.  This,  of  course, 
presupposes  that  he  will  continue  to  give  the  necessary 
time  and  study  to  this  function.  In  his  capacity  of  gen- 
eral adviser  he  may  be  able  to  carry  on  dealings  in  securi- 
ties for  customers'  account,  where  the  latter  give  special 
security,  in  accordance  with  the  provisions  of  the  stock- 
exchange  law.  On  the  other  hand,  in  view  of  the  low 
commissions  and  the  taxes  imposed  on  the  contango 
business,  it  would  be  better  policy  for  the  small  bankers 
to  engage  less  in  security  business  on  own  account,  to 
which  they  seem  to  have  been  giving  special  attention 
during  recent  years. 

Knowing  intimately  the  personal  standing  of  his  clients, 
the  smaller  banker  will  always  be  professionally  best  fitted 
to  foster  personal  credit,  and  more  particularly  blank 
credit — a  field  of  banking  that  calls  for  specialization, 
based  on  knowledge  of  individual  conditions. 

Where  there  are  no  deposit  offices  or  general  banks, 
the  smaller  banker  is  in  a  position  to  carry  on  success- 
fully also  a  general  banking  business  with  the  smaller 
tradesmen,  extending  to  them  the  facilities  of  check 
accounts,  current  accounts,  and  bill  discounting. 

On  the  bourse  his  legitimate  functions  are  trading  in 
unlisted  securities  (Kulisse),  the  arbitrage  business,  and 


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National    Monetary     Commission 

profiting  by  the  fluctuation  of  daily  quotations  on  the 
different  exchanges  whenever  bid  and  ask  prices  do  not 
accord. 

He  is  in  a  position  best  to  understand  the  needs  of 
small  manufacturers  and  to  know  thoroughly  the  intrinsic 
value  of  solid  securities,  both  stocks  and  bonds,  issued  by 
them,  and  to  find  a  wide  market  for  them.  Under  this 
head  belong  also  debentures  of  smaller  industrial  estab- 
lishments, which,  while  of  undoubted  solidity,  are  issued 
in  amounts  too  small  to  be  listed  on  German  exchanges 
(in  case  the  amount  is  less  than  1,000,000  or  500,000 
marks,  respectively).8 

On  the  other  hand  the  recent  practice,  due  to  the  faults 
of  the  stock  exchange  legislation,  of  the  smaller  banker 
assuming  the  functions  of  industrial  entrepreneur  by 
means  of  permanent  acquisitions  on  a  large  scale  of  stock 
or  of  other  participations,  seems  to  us  of  rather  doubtful 
wisdom. 

Finally  there  is  no  reason  why  the  development  toward 
more  powerful  enterprises  in  the  shape  of  joint-stock  or 
limited  liability  companies,  large  beginnings  of  which 
may  be  seen  even  at  present  by  cooperation  with  the  great 
banks,  and  even  independently  of  them,  should  not  prove 
successful  on  an  equally  large  scale  in  the  case  of  other 
provincial  banking  concerns  either  singly  or  in  combina- 
tion with  others  of  the  same  class.  A  few  recent  examples 
of  this  development  are  the  following: 

Thus  with  the  assistance  of  the  Hannover sche  Bank  and 
its  subsidiaries,  the  Osnabrucker  and  Hildesheimer  banks, 
the  private  banking  firm  of  Ludwig  Peters  Nachfolger  was 
transformed  in  1905  into  the  Braunschweiger  Privatbank 


The     German     Great    Banks 

Aktiengesellschaft  (with  a  total  capital  of  6,000,000  marks). 
In  the  same  way,  with  the  cooperation  of  the  Disconto- 
Gesellschaft  and  the  Berliner  Handels-Gesellschaft,  the 
banking  firm  of  Perls  &  Co.  in  Breslau  was  transformed 
into  the  Schlesische  Handelsbank  Aktiengesellschaft,  Bres- 
lau, which  in  1909  opened  in  turn  a  branch  in  Beuthen 
and  one  in  Striegau.  In  1906  the  banking  house  Johann 
Ohligschlaeger  of  Aix-la-Chapelle,  of  the  Rheinisch-West- 
falische  Disconto-Gesellschaft  group,  was  converted  into  a 
limited  liability  association,  with  a  capital  of  5,500,000 
marks.  In  1908  the  banking  house  of  Doertenbach  &  Co., 
Stuttgart,  was  changed  to  a  limited  liability  association 
with  a  capital  of  4,000,000  marks.  In  1908  the  Hessischer 
Bankverein  Aktiengesellschaft  in  Kassel  was  organized 
through  the  merger  of  the  banking  firm  of  Leopold  Plaut 
&  Co.,  of  Kassel,  and  J.  C.  Plaut  &  Co.  in  Eschwege. 

In  1907  the  Berlin  banking  firm  Carl  Neuburger  was 
transformed  into  a  stock  company  en  commandite,  and  by 
the  end  of  1908  the  latter  had  established  eight  branches 
in  different  localities  besides  five  deposit  offices.  In 
addition  it  had  absorbed  two  banking  firms  (C.  Fahndrich 
&  Co.  in  Flirstenwalde  and  the  Westfalische  Bank  M. 
Hirschfeld  in  Iserlohn).  Early  in  1909  it  added  a  branch 
in  Deutsch- Krone. 

The  banking  house  of  L.  &  E.  Wertheimber,  of  Frankfort- 
on  the  Main,  adopted  an  original  procedure.  It  founded 
a  separate  enterprise  under  the  name  of  Bank-  und 
Wechselstuben-Gesellschaft  m.  b.  H.,  to  operate  exchange 
offices  in  Frankfort.  The  entire  capital  stock  of  the  con- 
cern, 2 ,000,000  marks,  was  retained  by  the  banking  house  of 
L.  &  E.  Wertheimber,  which  continued  operations  as  before. 


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National    Monetary     Commission 

Finally  there  is  no  doubt  that  what  has  been  done 
successfully  in  other  countries  is  also  possible  in  Ger- 
many (9),  viz:  To  unite  smaller  bankers  into  syndicates 
or  groups  which  will  act  not  only  without  any  antagonism 
toward  the  great  banks,  but  rather  enter  into  definite 
agreements  and  thus  act  in  concert  with  them. 

The  future  activity  of  private  bankers  in  receiving 
deposits  is  indeed  threatened  by  the  voluntary  publica- 
tion of  periodic  financial  statements  by  the  joint-stock 
banks  since  1909.  In  order  to  save  this  branch  of  business 
for  the  private  banker,  we  might  well  resort  to  the  joint 
liability  idea  of  the  Roman  societas  argentariorum,  i.  e., 
bankers'  associations  with  unlimited  liability,  adapting, 
of  course,  the  principle  to  present  day  conditions.0 

So  much  for  the  effect  of  concentration  on  the  smaller 
banker. 

We  have  repeatedly  called  attention  to  certain  disad- 
vantages of  concentration  for  the  central  banks.  There 
is  on  the  one  hand  danger  that  their  ability  to  maintain 
their  assets  in  liquid  form  may  be  impaired  particularly  at 
critical  times  by  excessive  demands  for  credit  and  funds,  on 
the  part  of  subsidiary  companies,  trust  companies,  branches, 
commandites,  agencies,  and  institutions  joined  with  them 
in  a  community  of  interest.  It  was  also  pointed  out  that 
it  is  becoming  increasingly  more  difficult  for  the  central 
banks  to  control  the  proper  use  of  their  credit  and  funds. 
As  we  saw,  with  the  progress  of  concentration  the  condition 
of  the  banks  from  the  point  of  view  of  the  liquidity  of  their 
assets  has  steadily  grown  worse  to  an  extent  that  can  no 

a  There  are  some  indications  that  since  the  enactment  of  the  supple- 
mentary bourse  law  (May  8,  1908)  an  improvement  in  the  condition  of 
private  banking  has  set  in,  which  finds  expression  also  in  a  considerable 
increase  in  the  number  of  newly  founded  private  banking  firms. 

764 


The     German     Great    Banks 

longer  be  lightly  passed  over.  Unless  an  improvement  is 
brought  about  by  natural  causes  or  by  criticism  either 
from  within  or  by  the  general  public,  a  situation  might  be 
created  in  which  the  banks'  freedom  of  action  would  be 
impaired  in  critical  periods,  particularly  in  the  event  of 
war,  and  the  institutions  placed  in  a  perilous  condition  at  a 
most  critical  moment.  Public  attention  has  been  drawn 
to  this  situation  particularly  since  1908,  when  the  great 
banks  of  their  own  accord  began  the  publication  of  bi- 
monthly financial  statements  which  indicate  but  a  slow 
improvement  in  this  regard.  Furthermore,  it  must  be 
admitted  that  with  the  growth  and  decentralization  of 
the  operations  of  the  great  banks  and  their  groups  it 
becomes  increasingly  difficult  to  gain  an  adequate  com- 
prehension of  the  financial  reports  and  balance  sheets  - 
issued,  as  these  no  longer  represent  a  clear  and  full  picture 
of  the  condition  of  the  banks. 

The  effects  of  concentration  on  the  bank  employees  may 
be  summed  up  as  follows:  It  goes  without  saying  that  in 
the  course  of  the  concentration  movement  both  the  abso- 
lute number  of  employees  in  the  large  banks  as  well  as 
their  proportion  to  those  in  the  smaller  establishments  has 
increased  greatly — a  tendency  which  is,  however,  common 
to  other  branches  of  business.  According  to  the  census  of 
1882,  there  were  28  banks  employing  50  or  more  persons, 
with  a  total  number  of  2,697  employed  by  them.  Thir- 
teen years  later  the  census  of  1895  showed  66  banks  em- 
ploying each  50  or  more  persons,  with  a  total  force  of  7,802. 
In  the  thirteen  years  the  number  of  employees  in  the 
large  banks  had  increased  189.3  Per  cent.  On  the  other 
hand  the  number  employed  in  banking  establishments 


765 


National    Monetary     Commission 

with  less  than  5  employees  had  increased  only  59.9 
per  cent,  and  in  middle-sized  institutions,  with  6  to  50 
employees,  only  34.5  per  cent.10 

The  data  of  the  1907  census  are  not  yet  available  on  this 
point,  but  it  is  probable  that  the  number  employed  in  the 
large  banks  in  1907  represented  one- third  of  all  gainfully 
employed  in  "financial  and  credit"  institutions,  while  in 
1895  this  number  still  constituted  but  a  little  over  one- 
fifth  (21.60  per  cent),  and  in  1882  only  a  little  over  one- 
tenth  (n.8  per  cent)  of  the  persons  so  employed. 

From  these  figures  we  may  conclude  that  with  the 
progress  of  concentration  there  has  been  a  great  increase  in 
the  number  of  persons  who  have  but  slight  prospects  of 
ever  being  able  to  start  an  independent  banking  business 
of  their  own.  With  the  increasing  domination  of  banks 
with  huge  capital  on  the  one  hand  and  the  diminishing 
power  and  sphere  of  activity  of  the  private  banker,  the 
opportunities  of  building  up  a  private  banking  business 
have  now  become  considerably  smaller. 

In  many  respects  the  standing  of  the  bank  employee,  as 
such,  has  not  improved  with  the  growth  of  concentration. 
This  is  true  particularly  of  his  position  within  the  bank. 
The  number  of  employees  in  the  large  banks  is  steadily 
growing.  Thus,  for  instance,  at  the  close  of  1908  the 
Deutsche  Bank  had  a  force  of  4,860  as  compared  with 
4,439  at  the  end  of  1907.  As  the  number  of  bank  clerks 
increases  and  the  bank's  duties  become  more  manifold, 
there  is  naturally  introduced  a  greater  specialization  in  the 
work  of  each  employee.  As  a  result  there  is  no  chance  for 
a  rounded  development  or  a  general  training  in  the  pro- 
fession. This  involves  a  twofold  danger.  The  situation 


766 


The     German     Great    Banks 

may  result  in  a  gradual  loss  of  interest  in  the  work,  and 
may  also  rob  the  employee  of  the  broader  view  of  things 
which  in  turn  makes  it  harder  for  him  to  enter  another 
department  or  profession.  It  is  only  a  relatively  small 
number  of  banks  which  have  introduced  a  periodic  change 
of  work  for  their  employees,  a  practice  highly  desirable  not 
only  in  the  interest  of  the  employees,  but  also  of  the 
banks  themselves. 

Furthermore,  whenever  an  employee  is  discharged  it 
is  harder  for  him  to  find  employment  in  another  bank, 
particularly  in  one  of  the  ever-increasing  number  be- 
longing to  the  same  group.  This  is  in  the  nature  of 
things,  and  not  due  to  any  mutual  agreement  among 
the  banks.  This  does  not  apply,  however,  to  the  free- 
dom of  bank  officials  of  voluntarily  changing  employ- 
ment from  one  bank  to  another.  After  the  removal  of 
temporary  doubts  and  objections  this  freedom  has  been 
generally  conceded,  though  even  at  present  it  is  subject 
to  certain  limitations  in  the  interests  of  both  parties. 

It  was  feared  that  the  numerous  bank  mergers  and 
absorptions  of  private  banks  would  make  it  possible  to 
dispense  with  the  services  of  many  employees  and  lead 
to  their  discharge.  This  fear  has  fortunately  proved 
unfounded,  there  having  been  no  reduction  of  the  force 
worth  mentioning.  This  I  can  say  on  reliable  authority, 
having  made  inquiry  also  of  the  leaders  of  the  associa 
tions  of  bank  employees.  On  the  contrary,  in  all  such 
cases  the  common  rule  has  been  to  take  over  undiminished 
the  entire  available  force.  Where  mergers  took  place  or 
where  branches  were  established  in  place  of  absorbed  pri- 
vate banks,  there  was  usually  an  extension  of  the  business 


767 


National    Monetary     Commission 

which  made  it  necessary  to  increase  rather  than  to  reduce 
the  existing  personnel. 

As  the  power  and  capital  of  the  banks  have  grown, 
the  cases  have  become  increasingly  rare  where  a  com- 
plete prostration  of  business  or  a  crisis  has  resulted 
in  the  discharge  of  employees.  Moreover,  in  the  course 
of  the  concentration  movement  more  and  more  attention 
is  paid  by  the  banks  to  the  social  obligations  toward 
their  employees.  The  measures  taken  in  this  field  are 
due  to  the  common  labors  of  banks,  bankers,  and  the 
Central  Federation  of  German  Banks  and  Bankers  (Cen- 
traherband  des  Deutschen  Bank-und  Bankier-gewerbes). 

The  federation  began  an  extensive  and  laborious 
investigation  of  the  question  of  pensions  and  death 
benefits11  for  bank  employees  as  early  as  1903,  i.  e., 
before  the  Imperial  Government  undertook  a  similar 
inquiry  with  regard  to  all  salaried  persons  in  private 
employ.  Through  the  cooperation  of  many  persons  in 
banking  circles  and  among  the  bank  employees  them- 
selves there  was  organized  in  Berlin,  on  July  n,  1909, 
the  Beamtenversicherungsverein  des  deutschen  Bank-  und 
Bankiergewerbes  (a.  G.)  (Insurance  Association  of  the 
employees  of  German  Banks  and  Bankers).  The  asso- 
ciation assures  to  all  employees,  members  of  the  asso- 
ciation, a  pension  in  case  they  become  incapacitated 
after  ten  years'  service,  and  provides  benefits  for  widows 
and  pensions  for  orphans  in  case  of  death.  This  asso- 
ciation is  the  first  of  its  kind  in  Germany,  and  on  its 
board  of  honorary  directors  there  are  both  the  heads 
of  banks  and  bank  employees.  The  author  of  this  book 
is  chairman  of  the  supervisory  board.  In  the  case  of  the 
German  great  banks  such  insurance  had  been  instituted 

768 


The     German     Great    Banks 


even  before,  in  the  form  of  independent  funds,  funds 
controlled  by  the  bank,  or  special  insurance.  The  same 
is  true  also  of  many  other  credit  banks  and  likewise  of 
a  number  of  the  larger  private  banking  houses. 
,  On  the  subject  of  salaries  authentic  data  have  been 
collected  for  the  first  time  in  a  paper  of  the  business 
manager  of  the  Centralverband  Wittner,  so  far  as  it  was 
possible  to  secure  this  information  through  the  inquiry 
instituted  by  the  Centralverband.  For  a  proper  appre- 
ciation of  the  following  figures  it  is  well  to  bear  in  mind 
that  they  refer  only  to  the  regular  salaries  and  do  not 
include  the  customary  incidental  income  of  the  employees, 
such  as  Christmas',  or  New  Year's  bonuses,  which  usually 
amount  to  several  times  the  monthly  salary. 

In  the  following  table  there  are  given  the  average 
salaries  of  bank  employees,  exclusive  of  minor  employees, 
according  to  the  investigation  of  the  Central  Federation 
of  German  Banks  and  Bankers,  of  March,  1906.  For 
the  sake  of  comparison,  there  are  shown  also  the  corre- 
sponding average  yearly  incomes  of  all  salaried  employ- 
ees in  private  employment. 


Age. 

Average  sal- 
ary of  bank 
employees. 

Average  an- 
nual income 
for  all 
salaried 
employees. 

Marks. 

Marks. 

I    459 

467 

25  —  29  

2,  085 

i  954 

2     783 

a6«f 

3S~39  •  

3  1  3SI 

38o 

•i   618 

3    746 

404 

50—54  ..,.»..  

4.  O44 

,358 

3   800 

264 

60-64  ...      .             .            

3   806 

175 

65-69  

3,525 

»  007 

2    592 

879 

90311" — II- 


-50 


769 


National    Monetary     Commission 

The  salaries  here  shown  are  higher  throughout  (except 
for  the  age  group  20—24),  and  in  part  very  much  higher 
than  the  average  salaries  as  given  in  the  report  of  the 
Department  of  the  Interior  of  March  14,  ipoy,12  for 
salaries  in  all  private  establishments.  Their  present  level 
was  reached  gradually  during  the  progress  of  concentra- 
tion. On  the  average  they  are  also  higher  than  the 
salaries  paid  to  the  clerical  help  in  the  smaller  private 
banks. 

Whether  the  increase  in  salaries  has  only  kept  pace 
with  the  increased  cost  of  living  and  expenditures  of  the 
employees  of  the  banks,  or  whether  it  has  gone  beyond 
this  point  and  means  a  real  improvement  in  their  con- 
ditions, this  question  can  not  be  answered  even  with  an 
approximate  degree  of  assurance. 

So  far  as  my  experience  and  knowledge  go,  there 
has  never  been  among  the  German  credit  banks  any 
exploitation  of  unpaid  help  through  the  use  of  appren- 
tices, as  the  Berlin  great  banks  take  in  apprentices  only 
in  exceptional  cases. 

As  in  all  large  establishments  advancement  of  em- 
ployees to  independent  positions  within  the  bank  has  on 
the  whole  been  slow.  In  this  respect,  however,  concen- 
tration has  brought  about  a  marked  improvement.  The 
establishment  of  numerous  branches,  commandites,  de- 
posit offices,  agencies,  and  subsidiary  banks  at  home  and 
abroad  has  created  opportunities  for  the  promotion  of 
efficient  employees  more  numerous  than  before. 

The  Central  Federation  of  German  Banks  and  Bankers 
has  ever  been  in  sympathy  with  the  efforts  to  bring  about 
certain  improvements  in  the  conditions  of  the  working 


770 


The     German     Great    Banks 

staff,  as,  for  example,  the  extension  of  Sunday  rest,  early 
closing  on  Saturday,  and  better  regulation  of  vacations. 
The  reforms  proposed,  while  not  yet  commonly  adopted, 
are,  however,  nearer  realization,  as  the  result  of  progressive 
concentration  and  the  introduction  of  greater  uniformity 
in  the  internal  management  of  banks. 

The  part  of  the  heads  and  leading  personalities  in  the 
banks  has  now  become  much  more  important,  since  the 
former  under  certain  circumstances  are  called  upon  to 
determine  uniform  business  policies  for  entire  groups  of 
banks.  It  is  primarily  they  who  must  decide  whether  the 
banks  entrusted  to  their  management  shall  pursue  other 
and  higher  aims  than  merely  those  of  large  dividends. 
With  the  growth  of  the  large  establishments  on  the  one 
hand  and  the  disappearance  of  so  many  important  pri- 
vate banking  houses,  it  will  be  increasingly  difficult  to 
fill  these  positions  with  men  who  possess  the  necessary 
breadth  of  view,  the  powerful  initiative,  and  the  organiz- 
ing ability  to  which  Germany's  great  enterprises  in  trade, 
industry  and  banking  are  so  greatly  indebted.  Failure 
to  find  and  recognize  the  work  of  such  men  would  involve 
serious  consequences  not  only  for  the  concentration  move- 
ment, but  for  our  entire  economic  development.13 

It  remains  now  to  consider  the  effect  of  concentration 
on  the  development  of  the  stock  exchange.  There  is  a 
large  number  of  buying  and  selling  orders  coming  to  the 
great  banks  which  they  can  offset  against  each  other,  thus 
taking  over  the  function  of  the  exchange.  Only  such 
orders  as  can  not  be  offset  are  taken  to  the  stock  ex- 
change. This  applies  equally  to  the  business  in  securities, 


771 


National    Monetary     Commission 

i.  e.,  the  capital  market  and  to  the  discount  business, 
i.  e.,  the  money  market. 

The  result  has  been  that  the  bourse,  in  addition  to  the 
disorganizing  effects  of  the  stock  exchange  legislation,  has 
suffered  also  the  loss  of  ever  increasing  amounts  of  busi- 
ness. This  impaired  its  most  vital  function,  that  of 
proper  price  determination,  and  led  to  most  serious  con- 
sequences, especially  during  critical  times,  as  may  be 
proved  by  very  lamentable  examples.14 

There  is  danger  that  the  bourse  may  gradually  cease  to 
serve  as  the  most  sensitive  instrument  for  measuring  the 
movements  of  trade  or  to  act  as  "the  almost  automatic 
regulator  of  the  economic  currents  converging  toward 
it."  15  It  is  also  becoming  evident  that  more  and  more 
it  is  losing  its  capacity  by  means  of  its  quotations  to  reflect 
or  influence  public  opinion  as  regards  the  credit  and  man- 
agement of  the  large  majority  of  States,  communes,  stock 
companies,  and  other  corporations,  all  of  which  functions 
were  regarded  as  indispensable  for  the  business  community 
as  a  whole  and  the  trade  in  securities  in  particular. 

The  system  of  price  determinations  and  quotations  pre- 
vailing at  the  bourses,  which  in  former  years  represented 
the  fullest  and  truest  possible  reflex  of  existing  supply  and 
demand  as  well  as  other  "  economic  factors,  which  nowhere 
else  were  subject  to  such  comprehensive  perception  and 
accurate  measurement,"  is  bound  to  lose  much  of  its 
former  accuracy,  steadiness,  and  reliability,  all  of  which  is 
highly  regrettable  from  the  point  of  view  ot  public  in- 
terests. 

There  is  furthermore  ground  for  apprehension  that  this 
movement  which  also  involves  the  elimination  of  middle- 


772 


The     German     Great    Banks 

men  (brokers,  etc.)  may  develop  a  state  of  constantly 
growing  differences  between  bank  and  bourse.  These  dif- 
ferences may  express  themselves  in  more  than  a  certain 
tension  between  banking  and  bourse  interests,  which  is 
frequently  noticeable  even  at  present.  They  may  also 
come  to  affect  the  most  characteristic  function  of  the 
bourse,  the  determination  of  prices.  As  a  matter  of  fact, 
in  the  opinion  of  some  recent  writers,  there  is  a  direct 
antithesis  between  bank  and  bourse.16  I  regard  this  view 
as  erroneous,  but  not  more  so  than  that  of  other  writers, 
who  seem  to  regard  the  two  as  practically  identical.17 

Certain  socialists  contend  that  the  inevitable  result  of 
the  concentration  movement  now  manifest  in  all  branches 
of  trade  and  industry  will  be  to  cumulate  in  an  increasing 
volume  on  one  side  all  the  capital  and  income  and  on  the 
other  all  the  misery  and  poverty.  Such  has  not  been  the 
outcome,  nor  is  it  likely  to  be.  On  the  contrary,  the  social- 
istic theory  of  the  progressive  impoverishment  of  the 
masses  has  been  completely  refuted  by  the  progress  of 
concentration  in  industry  and  banking.  The  purchasing 
power  and  the  standard  of  living  of  the  laboring  classes 
have  improved,  the  income  of  the  middle  and  of  the  lower 
classes  has  risen  relatively  more  than  that  of  the  upper 
classes,  and  to  an  increasing  extent  members  of  the  lower 
classes  have  joined  the  ranks  of  the  upper  classes.18 

We  have  now  a  valuable  work  on  the  "  Development  of 
wages  in  industry  since  the  establishment  of  the  German 
Empire."  Under  this  title  R.  Kuczynski,  the  director  of 
the  statistical  bureau  of  the  city  of  Schoneberg. (Berlin, 
George  Reiner,  1909),  presents  an  extremely  valuable  col- 
lection of  comprehensive  and  reliable  data  covering  wages 


773 


National    Monetary     Commission 

paid  during  this  period  in  Germany  in  mining  (coal,  lig- 
nite, salt,  and  ore),  in  the  building  trades  (masons,  carpen- 
ters, painters,  fitters),  in  the  stone  and  woodworking 
trades  (joiners,  cabinet  makers,  pattern  makers,  and 
makers  of  window  blinds),  in  the  metal  trades,  the  book 
trade,  and  finally  in  transportation  (vehicular,  railroad, 
and  sea  transportation) . 

It  is  impracticable  here  to  reproduce  even  the  leading 
features  of  a  work  which  is  bound  to  retain  a  permanent 
place  in  the  literature  of  the  subject.  Suffice  it  to  say, 
that  the  movement  of  all  wages  paid  during  the  second 
period  shows  a  strong  upward  tendency,  more  or  less 
marked  according  to  the  branch  of  industry,  the  state  of 
general  prosperity,  the  location  of  the  enterprise,  the  dif- 
ference between  city  and  country,  the  kind  of  product,  and 
the  hours  of  work.  In  the  case  of  corporate  undertakings 
the  movement  of  wages  manifestly  is  also  influenced  by 
the  variations  in  dividends.  A  tabular  statement  show- 
ing the  influence  of  the  last  named  factor  in  each  particu- 
lar instance  would  be  of  special  interest.  I  therefore  re- 
frain from  citing  typical  instances  from  the  mass  of  mate- 
rial presented,  since  it  might  always  be  objected  that  they 
had  been  chosen  arbitrarily. 

Even  more  important  would  be  complementary  tables 
on  the  movement  of  prices  of  necessaries  of  life  during  the 
same  period.  For  one  thing  this  would  serve  to  test  the 
theory,  which  I  believe  to  be  correct,  that  "  every  increase 
in  the  prices  of  the  necessaries  of  life  gives  rise  to  an  effort 
on  the  part  of  the  workers  to  secure  higher  wages."19 
To  be  sure  these  efforts  do  not  always  overcome  the 
just  or  unjust  opposition  offered,  and  hence  it  may  be 


774 


The    German     Great    Banks 

difficult  to  prove  the  theory  satisfactorily  by  statistical 
evidence.20 

Such  complementary  tables  would  also  enable  us  to 
answer  the  further  question  whether  and  to  what  extent 
the  gain  to  the  workmen  through  higher  wages  has  been 
offset  by  the  simultaneous  or  preceding  rise  in  the  cost  of 
living.  This  much  is  certain,  that  the  increase  of  wages 
in  general  and  in  most  trades  has  been  greater  than  the 
increase  since  1879  in  the  prices  of  necessaries  caused  by 
the  import  duties  on  foodstuffs,  such  as  cereals,  flour, 
animals,  meat,  bacon,  and  lard. 

In  the  absence  of  such  parallel  investigations,  the  con- 
clusions drawn  from  the  wage  statistics  must  necessarily 
be  incomplete  and  open  to  attack.  They  have  to  be  sup- 
plemented by  reliable  investigations  of  the  growth  of 
prosperity  and  of  the  changes  in  the  condition  of  the 
working  classes.  On  this  point  valuable  information  is 
available  in  the  shape  of  the  Materialien  zur  Beurteilung  der 
Wohlstandsentwicklung  Deutschlands  im  letzten  Menschen- 
alter  (materials  for  estimating  the  growth  of  prosperity  in 
Germany  during  the  past  generation),  constituting  Part 
III  of  the  appendices  to  the  draft  of  the  imperial  financial 
reforms  act  of  1908. 

Evidence  in  the  same  direction  is  furnished  by 
Troeltsch.21  Taking  the  contributions  due  from  those 
who  come  under  the  old-age  and  disability  insurance  pro- 
visions, he  points  out  that  there  has  been  a  relative 
decrease  in  the  contributions  collected  from  the  lowest 
wage  classes.  This  is  especially  noteworthy  in  view  of  the 
fact  that  any  wage  increases  within  the  lowest  wage  groups 
do  not  at  all  affect  the  rate  of  contribution,  while  wage 


775 


National    Monetary     Commissio 


n 


increases  in  the  higher  wage  groups  either  do  not  result 
in  correspondingly  larger  contributions  or  do  so  only 
after  some  delay.  It  is  noteworthy,  moreover,  that  the 
lowest  wage  group  has  grown  by  the  accession  of  a  large 
number  of  low-paid  home  workers  who  during  that 
period  first  became  liable  to  insurance  contributions. 
Another  fact  of  some  importance  is  cited  by  Troeltsch,22 
viz,  that  25  per  cent  of  all  workmen  have  deposits  in  the 
Wurttemberg  district  savings  banks,  the  average  deposits 
for  each  depositor  belonging  to  that  class  amounting  to 
525.1  marks  in  1892  and  571.7  marks  in  1896. 

Another  prediction  made  by  socialists  is  that  the  final 
outcome  of  concentration  will  be  the  socialization  of  the 
means  of  production,  for  which  they  are  striving  and 
which  is  to  be  consummated  in  the  "state  of  the  future." 
This  prediction  has  not  been  realized  in  Germany,  nor  is 
it  likely  to  be  realized,  if  only  for  the  one  reason  that 
individual  independence  still  constitutes  a  cherished  ideal 
in  the  minds  of  most  Germans.  It  was  this  sentiment 
chiefly  which  prevented  German  cartels  from  assuming 
the  form  of  trusts  proper,  despite  the  great  technical 
advantages  which  go  with  this  type  of  organization. 

Finally,  the  movement  of  concentration  has  thus  far 
not  resulted  in  a  comprehensive  system  of  state-owned 
industries,  a  policy  regarded  by  many  as  necessary  and 
highly  desirable;  nor  is  this  likely  to  happen  unless  wholly 
unforeseen  developments  take  place.  Nationalization  of 
industry  is  practicable  only  in  case  of  industries  in  which 
operation  is  more  or  less  automatic.  Unless  demanded  by 
imperative  reasons  in  some  special  branch  of  industry  in 
the  interests  of  national  self-preservation,  or  of  the  safety, 


776 


The     German     Great    Banks 

rapidity,  and  extension  of  traffic,  such  nationalization 
represents  but  a  backward  step  from  the  economic  point 
of  view. 

Government  operation  does  not  leave  adequate  scope 
for  personal  initiative,  which  is  indispensable  for  general 
economic  progress,  nor  for  the  needful  spirit  of  enterprise 
on  the  part  of  the  managers.  The  taking  over  by  the 
Government  of  private  enterprises  beyond  the  bounds 
mentioned  above  is  in  keeping  with  the  tenets  of  collectiv- 
ist  industrial  organization  advocated  by  social  democracy. 
It  would  tend  to  weaken  the  motive  of  private  gain,  the 
most  powerful  stimulus  of  all  economic  progress.  More- 
over, it  would  make  impossible  the  free  development  of 
the  enterprising,  efficient,  and  far-sighted  personalities  to 
whose  energetic  and  untrammeled  initiative  Germany 
owes  so  much. 

The  tendency  toward  state  socialism,  represented  par- 
ticularly by  Adolph  Wagner,  which  advocates  state  mo- 
nopolies and  the  tightening  of  the  screws  of  taxation  to  the 
point  of  expropriation,  in  my  opinion  is  likely  to  do  more 
harm  to  Germany  than  could  ever  be  done  by  the  purely 
individualistic  tendency,  little  as  I  am  disposed  to  favor 
the  latter. 

In  Germany,  particularly,  where  the  mere  possibility  of 
danger  or  of  excesses23  is  sufficient  to  create  a  demand 
for  state  interference,  one  thing  above  all  should  be  borne 
in  mind.  What  holds  good  for  the  cartels  is  also  true  of 
all  movements  toward  concentration — all  of  them  are,  if 
not  the  products  of  distress,  at  any  rate  products  of  neces- 
sity. It  is  the  general  opinion  in  industrial  circles  that 
they  are  the  most  effective  weapons  in  the  struggle  for 


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National    Monetary     Commission 

existence,  especially  in  competition  with  foreign  countries. 
The  coincidence  of  similar  movements  in  nearly  all  civil- 
ized countries  on  the  same  level  of  economic  development 
of  itself  makes  it  probable  that  this  view  is  correct  and 
that  legislative  interference,  which  is  urged  at  times  with- 
out any  definite  purpose  in  view,  merely  to  impede  the 
movement  toward  concentration,  represents  a  one-sided 
economic  disarmament,  a  policy  highly  profitable — to 
other  countries. 

In  Germany  we  have  special  cause  for  holding  our  weap- 
ons ready. 

We  know  that  our  agriculture  is  far  from  able  to  supply 
our  rapidly  growing  population  with  the  necessary  food. 
This  remains  true  even  after  allowance  is  made  for  the 
improvement  in  its  position  through  the  recent  commer- 
cial treaties  and  for  a  considerable  increase  both  of  the  pro- 
ductivity of  the  land  and  of  the  area  under  cultivation. 
We  know,  further,  that  we  depend  at  present  and  shall  de- 
pend in  the  future  on  importation  for  a  large  part  of  our 
raw  material,  both  in  the  shape  of  tropical  products  and 
of  iron  ore,  lumber,  fodder,  and  fertilizers.24  Finally, 
we  know  that  in  many  branches  of  industry  our  exports 
have  declined,  though  only  temporarily,  let  us  hope,  and 
that  the  general  field  for  export  is  seriously  threatened,  one 
example  being  our  sugar  exports,  in  which  agriculture  is 
directly  interested.  Some  foreign  countries  which  here- 
tofore were  among  our  best  customers  are  developing  indus- 
tries of  their  own,  which  make  them  more  and  more  inde- 
pendent of  our  manufactures.  Again,  we  have  to  reckon 
with  the  possible  introduction  of  high  import  duties  or 
preferential  duties  in  favor  of  the  mother  country,  or, 

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The     German     Great     Banks 

finally,  with  more  intense  and  dangerous  competition  on 
the  part  of  other  countries,  such  as  the  United  States  in 
the  South  American  markets.  Meanwhile  the  growth  of 
our  investments  of  capital  abroad,  with  the  income  from 
which  we  have  to  pay  an  important  part  of  our  unfavor- 
able trade  balance,  has  not  kept  pace  with  that  of  the  ex- 
cess of  our  imports  over  exports.  In  view  of  these  facts, 
and  of  the  greater  extent  and  strength  of  concentration 
abroad,  I  do  not  believe  that  we  in  Germany  are  as  yet 
justified  in  putting  a  check  on  the  further  progress  of  con- 
centration, except  so  far  as  relates  to  measures  aiming 
merely  at  greater  publicity25  in  the  case  of  cartels,  or  such 
as  are  dictated  by  considerations  of  social  policy  under 
conditions  mentioned  above. 

The  view  expressed  is  confirmed  by  another  considera- 
tion. Up  to  1907  the  movement  of  concentration  in  Ger- 
man industry  and  banking  was  continuously  upward.  We 
must,  however,  reckon  also  with  unfavorable  conditions  in 
German  trade  and  industry.  Reasonable  dividends  on 
the  greatly  increased  capital  of  the  banks  depend  on  gen- 
eral prosperity  in  trade  and  industry,  and  it  is  inevitable 
that  the  banks  will  suffer  from  adverse  conditions  in  the 
branches  of  industries  with  which  they  are  allied.  Unfa- 
vorable trade  conditions  must  result  in  bringing  concen- 
tration to  a  standstill.  This  happened,  indeed,  in  1907 
and  1908  in  the  case  of  the  great  banks  for  this  and  other 
reasons.  The  movement  may  even  be  reversed,  as  hap- 
pened more  than  once  in  the  history  of  banking,  a  recent 
example  being  the  dissolution  of  the  community  of  interest 
between  the  Dresdner  Bank  and  the  A.  Schaaffhausen'- 
scher  Bankverein.26 


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National    Monetary     Commission 

Exceptional  legislation  of  the  kind  mentioned  can  best 
be  avoided  if  the  leaders  of  our  great  enterprises  will  keep 
more  and  more  in  close  touch  with  the  active  social  con- 
science of  our  people. 

At  a  general  meeting  of  the  Verein  fur  Sozialpolitik 27 
Brentano  reported  that  when  in  December,  1903,  one  of 
the  largest  English  mine  owners  proposed  to  consoli- 
date all  English  coal  mines  into  a  single  trust  he  accom- 
panied this  plan  with  the  proposal  that  representatives 
of  the  labor  organizations  should  be  called  in  and  given 
a  place  not  merely  in  the  discussion  of  wages  and  condi- 
tions of  labor,  but  even  as  regular  members  of  the  board 
of  directors.  This  idea  was  certainly  in  accord  with  the 
true  conception  that  such  a  policy  would  not  only  confer 
rights  but  also  impose  duties  on  the  workmen,  and  that 
we  cannot  justly  hold  anyone  responsible  for  his  conduct 
in  economic  matters  so  long  as  we  have  not  given  him 
an  opportunity  to  develop  a  sense  of  personal  responsi- 
bility. 

This  proposal  was  expressive  alike  of  business  shrewd- 
ness and  socio-political  insight,  and  represents  an  attitude 
from  which  we  are  still  far  removed  in  Germany.  Ger- 
man employers  still  largely  cling  to  the  belief  that  they 
can  indefinitely  postpone  the  recognition  of  the  right  of 
workmen  to  combine  and  to  bargain  with  them  through 
representatives,  whereas  a  more  liberal  policy  is  called  for 
in  view  of  the  combinations  that  have  taken  place  among 
the  employers.  It  is  my  conviction  that  even  mere 
passive  resistance  to  these  demands  tends  both  to  sharpen 
the  antagonism  and  to  increase  the  number  and  vehemence 
of  the  demands. 


780 


The     German     Great     Banks 

Our  economic  development  in  many  respects  will  depend 
on  the  degree  of  socio-political  insight  possessed  by  the 
leaders  of  our  great  enterprises,  the  extent  to  which  they 
appreciate  the  social  duties  and  obligations  that  devolve 
upon  them,  and  the  economic  self-restraint  which  they 
will  impose  upon  themselves.  A  state  within  the  state 
can  not  and  will  not  be  tolerated. 

The  future  of  German  banking  will  depend  essentially 
on  the  character  of  the  men  at  the  head  of  the  leading 
enterprises.  All  will  be  well  if  these  leaders  possess  the 
necessary  caution,  knowing  that  it  is  not  safe  to  over- 
strain the  bow  or  overheat  the  boilers. 

I  feel  confident  that  German  banking  by  its  own  efforts 
will  prove  strong  enough  to  keep  out  of  leading  positions 
men  who  have  what  Waentig 28  calls  ''robust  con- 
sciences," and  who  cast  overboard,  as  useless  ballast,  all 
ethical  and  social  considerations.  Should,  however,  the 
contrary  come  to  pass,  in  spite  of  our  hopes  and  expecta- 
tions, public  opinion  watching,  as  it  does,  our  largest 
enterprises  with  the  greatest  attention,  will  surely  react 
more  quickly  and  effectively  than  it  ever  did  in  any  other 
period  of  our  economic  development. 

One  of  the  most  hopeful  features  characteristic  of  our 
economic  development  has  been  a  growth  of  public  senti- 
ment and  sensitiveness  against  encroachments  of  any 
kind,  a  growth  which  in  extent  and  rapidity  has  equaled, 
nay,  exceeded,  the  movement  of  concentration. 


781 


NOTES. 


783 


T.   "Canit: 


NOTES. 
Part  I. 


1.  "Capitalistic  economics,"  in  the  popular  sense  of  the  expression,  sig- 
nifies not  only  production  tending  toward  the  formation  of  capital  goods, 
but  also  production  "carried  on  under  the  rule  and  direction  of  the  owner 
of  the  capital,  or  the  capitalist"  (E.  von  Bohm-Bawerk,  "Kapital,"  in  the 
Handworterbuch  der  Staatswissenschaften,  2d  ed.,  vol.  5,  p.  25).     Ruhland, 
it  is  true,  in  his  "System der  Politischen  Okonomie"  (Berlin,  1908),  Vol.  Ill, 
p.  302,  ventures  to  say  that  "  the  word  capitalism  denotes  to-day  a  social  sys- 
tem in  which  the  liberty  to  practice  usury  is  more  or  less  completely  legalized." 
Capitalists  are  to  him  "usurers  in  the  widest  sense  of  the  word,"  and  by 
usury  he,  like  Franz  Schaub,  understands  "every  contractual  appropria- 
tion of  an  evident  surplus  value."     The  symptoms  of  such  capitalism, 
according  to  Ruhland,  are  "that  money  interests  predominate,  and  that 
trade  and  robbery,   gain,   usury,   and  extortion  merge  into  each  other" 
(ibid.,  p.  1 1 6,  No.  yaa). 

2.  Carl  Menger:  Contribution  to  the  theory  of  capital.     (Jahrbiicher  fur 
Nationalokonomie  und  Statistik,  2d  series,  Vol.  XVII,  pp.  1-49.) 

3.  I  have  used  the  expression  "to  turn  to  good  account"  in  place  of  "to 
distribute"    on   becoming   acquainted   with   Rob.   Liefmann's  suggestion 
("Beteiligungs-  und  Finanzierungsgesellschaften;"  Jena,  Gustav  Fischer, 
1909,  p.  476)  that  it  is  better  to  say  "to  place  at  disposal"  than  "to  dis- 
tribute."    I  am  sure  Liefmann  will  not  object  to  the  expression  "to  turn 
to  good  account,"  which   I  am   now  using,  especially  since  "to  place  at 
disposal"  only  represents  one  way  of  turning  to  good  account. 

4.  See  especially  Rich.  Ehrenberg:  Der  Handel.     Seine  wirtschaftliche 
Bedeutung,  seine  nationalen  Pflichten  und  sein  Verhaltnis  zum  Staate,  Jena, 
G.  Fischer,  1887. 

5.  See  Ad.  Wagner,  Beitrage  zur  Lehre  von  den  Banken,  Leipzig,  Leop. 
Voss,  1857,  p.  70. 

6.  See  Heinr.  Rauchberg:  Der  Clearing-  u.  Giro-Verkehr  in  Oesterreich- 
Ungarn  u.  im  Auslande   (Vienna,   Alfred  Holder,    1897),   especially:  Die 
Bedeutung  der  geldlosen  Ausgleichungen  fur  die  Abwicklung  des  volks- 
wirtschaftlichen  Zahlungsprozesses   u.    die    Reform    des    osterreichischen 
Zahlungsverkehrs,  p.  180  seq. 

7.  See  Heinrich  Rauchberg,  loc.  cit.,  p.  204. 

8.  This  is  expressly  attested  for  Saxony  by  Rud.  Banck  (Geschichte 
der  Sachsischen  Banken,  p.  5).     It  was,  however,  in  nowise  peculiar  of 
that  country. 

90311°— ii 51  785 


National    Monetary     Commission 

9.  The  names  and  years  of  foundation  of  the  German  note-issuing  banks 
existing  up  to  1859  were  as  follows:  1765,  the  Preussische  Bank;  1824,  the 
Ritterschaftliche  Privatbank  of  Pomerania,  at  Stettin;  1835,  the  Baye- 
rische  Hypotheken-   und   Wechselbank   at   Munich;  1839,    the  Leipziger 
Bank;  1847,  the  Anhalt-Dessauische  Landesbank;  1850,  the  Bank  of  the 
Berliner  Kassenverein ;  1853,  the  Weimarische  Bank;  1854,  the  Frankfurter 
Bank  at  Frankfort-on-the-Main;  1855,  the  Bank  fur  Siiddeutschland,  at 
Darmstadt;  the   Thuringische    Bank,    at   Sondershausen ;  the    Kolnische 
Privatbank,  at  Cologne  and  the  Landgraflich  Hessische  Konzessionierte 
Landesbank  at  Homburg  v.  d.  Hohe;    1856,   the  Mitteldeutsche  Kredit- 
bank,  at  Meiningen;  the  Bremer    Bank,  the    Hannoversche    Bank,    the 
Gothaer  Privatbank,  the  Magdeburger  Privatbank,  the  Liibecker  Privat- 
bank; 1859,  the  Niedersachsische  Bank,  at  Bueckeburg,  and  the  Commerz- 
bank,  at  Lubeck. 

10.  See  Alfr.  Lansburgh  in  ''Die  Bank,"  November,  1908,  pp.  1079  and 
1083,  and  in  a  special  work  bearing  the  (much  too  comprehensive)  title  of 
Das  deutsche  Bankwesen,  Charlottenburg,  1909,  pp.  48,  49,  and  52.     He 
draws  attention  to  the  fact  that  Krupp  acquired  the  name  of  a  "cannon 
king"  without  having  required  the  help  of  an  industrial  and  credit  bank. 
The  fact  is  that  the  development  of  the  Krupp  works  proceeded  with 
extreme  slowness  in  the  early  days,  when  there  was  no  banking  assistance. 
See  Otto  Jeidels  "  Das  Vernal tnis  der  deutschen  Grossbanken  zur  Industrie," 
Leipzig,  Duncker  &  Humblot,  p.  2. 

n.  Rud.  Banck,  loc.  cit.,  pp.  5-6.  See  Herm.  Schumacher:  Die  Ursa- 
chen  und  Wirkungen  der  Konzentration  im  deutschen  Bankwesen,  in 
Schmollers  Jahrb.,  xxx,  No.  3,  p.  5.  For  the  particular  reasons  why  the 
establishment  of  the  Credit  Mobilier  in  France  was  at  that  time  welcomed 
and  promoted  far  and  wide  and  even  by  the  Government,  see  text,  p.  50. 

12.  Thus  for  Saxony  by  Rud.  Banck,  loc.  cit.,  p.  6. 

13.  For  instance,  in  the  petition  for  the  concession  of  the  Frankfurter 
Vereinsbank  in  1864  (Geschichte  der  Handelskammer  zu  Frankfurt  a.  M., 
1707-1908,  p.  669);  see  sec.  i  of  the  statutes  of  the  Bank  fur  Handel  und 
Industrie  (Darmstadter  Bank)  in  Darmstadt,  1853. 

14.  Das  heutige   Aktienwesen    im    Zusammenhang    mit    der    neueren 
Entwicklung  der   Volkswirtschaft  (Deutsche   Vierteljahrsschrift,  Heft   3, 
l856,  J-  G.  Cotta,  pp.  296-297). 

15.  In  this  matter  there  is  permanent  cooperation  on  the  part  of  the 
supervisory  boards;  a  fact  which  has,  by  the  way,  been  questioned  by  War- 
schauer  (Zur  Aufsichtsratsfrage  in  Conrad's  Jahrbucher,   III  series,  Vol. 
XXVII,   pp.    794-795.)     The   ".great  banks,"    the  very   ones   to   which 
Warschauer  refers  to  show  the  complete  impotence  of  the  supervisory 
board  as  regards  the  drawing  up  of  inventories,  make  it  a  practice  to  sub- 
mit at  each  meeting  (held  nearly  every  month)  a  general  inventory,  which 
is  not  only  examined,   but  if  necessary  discussed  in  detail  during  the 
meeting. 


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The     German     Great     Banks 


16.  See  below  Part  III,  chap.  Ill,  sec.  2,  sub.  IA:  The  deposit  business, 
p.  191. 

17.  To  propound  a  theory  of  crises  does  not  lie  within  the  scope  of  this 
work.     On  this  subject  the  following  works  should  be  consulted:  Michael 
von  Tugan-Baranowsky,  Studien  zur  Theorie  und  Geschichte  der  Handels- 
krisen  in  England  (Jena,  1901,  Gustav  Fischer),  and  Ludwig  Pohle,  Bevol- 
kerungsbewegung,  Kapitalbildung  und  periodische  Wirtschaf tskrisen  (Goet- 
tingen,  1902,  Vandenhoeck  &  Ruprecht),  as  well  as  the  criticism  of  both 
theories  by  Arthur  Spiethoff  (Schmoller's  Jahrbiicher  fur  Gesetzgebung, 
etc.,  Vol.  XXVII,  No.  2,  p.  331  et  seq.). 

For  a  very  detailed  list  of  works  published  up  to  1899  on  the  subject  of 
crises,  see  Theodore  E-  Burton,  Financial  Crises  and  Periods  of  Industrial 
and  Commercial  Depression  (New  York,  1902,  D.  Appleton  &  Co.),  pp.  347- 
377.  Unfortunately  that  list  includes  a  number  of  perfectly  worthless 
works. 

1 8.  See  the  very  instructive  book  by  J.  W.  Gilbart  (a  former  director  of 
the  London  and  Westminster  Bank):  "The  History,  Principles,  and  Prac- 
tice of  Banking"  (ed.  1901,  London,  George  Bell  &  Sons);  concerning  the 
crisis  of  1825,  ibid.,  I,  pp.  310-311;  the  crisis  of  1836,  ibid.,  I,  p.  311  seq.; 
the  crisis  of  1857,  ibid.,  II,  p.  361,  seq.,  and  the  crisis  of  1866,  ibid.,  II,  p. 
342  seq. 

In  1836  over  70  new  companies  of  every  possible  description  were  founded 
in  three  months,  in  Liverpool  and  Manchester  alone.  The  facility  with 
which  credit  was  obtained,  and  the  encouragement  thus  given  to  specula- 
tion, led  to  increases  of  from  25  to  100  per  cent  in  the  prices  of  all  the  chief 
articles  of  consumption,  and  of  the  raw  materials  of  industry.  In  July, 
1836,  the  Bank  of  England  raised  its  rate  of  discount  to  ^%  per  cent  and 
in  September  to  5  per  cent.  Simultaneously  it  refused  to  discount  a  large 
number  of  American  bills  on  first-rate  houses,  a  proceeding  that  caused 
some  excitement.  Prices  fell,  and  a  number  of  firms,  mostly  second-class 
houses,  failed.  The  banks  withheld  their  resources,  and  thus  increased  the 
crisis.  The  joint  stock  banks  had  increased  enormously,  had  raised  their 
capitals  considerably,  and  promoted  speculation.  This  was  referred  to  in 
very  harsh  terms  in  a  "Report  of  the  Select  Committee  of  the  House  of 
Commons,"  which,  in  conjunction  with  the  prevalent  depression,  awakened 
the  suspicion  of  the  general  public.  In  November,  1836,  the  Agricultural 
and  Commercial  Bank  of  Ireland  suspended  payments,  which  caused 
restrictive  measures  to  be  taken  against  the  jo;nt  stock  banks,  which  were 
accustomed  to  rediscount  their  bills  in  London.  In  December,  1836,  the 
Northern  and  Central  Bank  of  Manchester,  with  a  paid-up  capital  of 
£800,000,  had  to  apply  to  the  Bank  of  England  for  assistance.  One 
London  private  bank,  three  large  branches  of  American  firms,  and  many 
respectable  trading  firms  followed  suit. 

In  1857  (ibid.,  II,  p.  361),  30  houses  failed  in  England  with  liabilities  of 
about  £9,080,000.  First  of  all  the  Borough  Bank  at  Liverpool  (October, 
1857),  with  deposits  amounting  to  £1,200,000,  whereof  £800,000  were  at 


787 


National    Monetary     Commission 

call;  then  on  November  9,  1857,  the  Western  Bank  of  Scotland,  a  very 
important  Scotch  deposit  bank  with  161  branches  in  Scotland,  which  had 
paid  a  dividend  of  9  per  cent  in  1856.  It  had  claims  of  £1,603,000  on  4 
trading  firms  that  had  become  insolvent,  whereas  its  entire  nominal  capital 
amounted  to  £1,500,000  only,  and  an  item  of  £260,000  had  figured  in  its 
published  balance  sheet  under  "good  assets,"  which  the  managers  them- 
selves, according  to  notes  found  afterwards,  had  described  as  bad.  The  bills 
of  one  of  the  4  insolvent  firms  had  been  accepted  by  124  different  persons; 
inquiries  had  been  made  by  the  bank  only  concerning  37  of  these  persons, 
and  of  these  latter  2 1  had  been  found  either  unsatisfactory  or  positively  bad. 

In  1864,  that  is  to  say,  shortly  before  the  credit  and  speculation  crisis 
of  1866  (ibid.,  II,  pp.  342-357),  263  companies  with  a  nominal  capital  of 
£78,135,000  had  been  formed  in  England,  including  27  banks  and  15 
"discount  companies."  The  rate  of  bank  discount,  which  up  to  the  middle 
of  1865  stood  at  3  per  cent,  went  up  on  October  2,  1865,  to  5  per  cent  and 
on  October  7,  1865,  to  7  per  cent,  the  Bank  of  France  at  the  same  time 
raising  its  discount  rate  from  4  per  cent  to  5  per  cent.  The  Joint  Stock 
Discount  Company  failed  in  the  beginning  of  1866;  in  April,  1866,  Earned 's 
Bank  at  Liverpool,  with  liabilities  amounting  to  £3,500,000,  a  failure  that 
caused  a  panic.  The  Bank  of  England  raised  its  discount  rate  on  May  8, 
1866,  to  8  per  cent,  and  on  the  gth  to  9  per  cent.  On  May  10,  1866,  the 
great  discount  house  of  Messrs.  Overend,  Gurney  &  Co.  failed  with  liabilities 
amounting  to  £10,000,000;  the  bank  rate  was  raised  to  10  per  cent.  Then, 
in  rapid  succession,  came  the  failures  of  the  Bank  of  London,  the  Con- 
solidated Bank,  the  Agrar  and  Masterman's  Bank — all  deposit  banks; 
further,  the  English  Joint-Stock  Bank,  the  Imperial  Mercantile  Credit 
Company,  the  European  Bank,  etc.  Within  a  period  of  ten  days  the  Bank 
of  England  had  granted  advances  on  bills  and  discounted  bills  to  the  extent 
of  £12,225,000;  permission  was  granted  to  it  to  issue  notes  in  excess  of  the 
legal  limit.  The  doors  of  the  most  respectable  banking  firms  were  besieged, 
and  the  reports  circulating  did  not  stop  at  the  most  respectable  names, 
and  augmented  the  evil.  Credit  had  been  granted  without  discrimination, 
and  the  banks  had  either  favored  or  themselves  carried  on  speculation  in 
every  direction.  "  Men  are  in  haste  to  become  rich.  This  is  no  new  thing; 
it  has  been  so  at  all  times  and  in  all  countries.  But  the  fact  is  more  patent 
now  than  ever.  Men  live  as  they  journey — at  railroad  pace"  (ibid.,  II, 
p.  356).  See  also  Max  Wirth,  Geschichte  der  Handelskrisen,  2d  ed., 
Frankfort-on-the-Main,  1874.  For  the  crisis  of  1857,  see  Otto  Michaelis, 
Volkswirtschaftliche  Fragen,  vol.  i  (Berlin,  F.  A.  Herbig,  1873),  pp.  237- 
372;  and  Die  Handelkrisis  von  1857  (this  last  article  was  written  between 
March,  1858,  and  May,  1859). 

The  similarity  with  corresponding  German  crises  is  evident.  Recollec- 
tions of  such  crises,  however,  seem  to  disappear  more  rapidly  than  the  in- 
juries they  inflict.  This  remarkable  but  firmly  established  fact,  however, 
should  not  apply  to  the  directors  of  banks,  who  should  and  must  gain 
experience  from  every  crisis. 


788 


T  h  e     German     Great    Banks 

*ig.  This  was  especially  noticeable  in  the  German  crisis  of  1900,  and  in 
the  German  and  American  crises  of  1873.  Regarding  the  latter,  Theodore 
E.  Burton  (loc.  cit.,  p.  287)  remarks:  "There  was  an  enormous  ab- 
sorption of  circulating  capital  in  fixed  capital.  Railways  as  well  as  docks, 
buildings,  factories,  had  been  constructed  on  an  unprecedented  scale.  All 
the  equipment  for  future  production  was  increasing  at  a  more  rapid  pace 
than  ever  before.  In  these  expenditures  we  have  the  effect  of  capital  in- 
vested for  objects  not  immediately  remunerative." 

20.  Der  deutsche  Geldmarkt,   1895-1902,  in  the  Schriften  des  Vereins 
fur  Sozialpolitik,  Vol.  CX  (Die  Storungen  im  deutschen  Wirtschaftsleben 
wahrend  der  Jahre  1900,  ff.,  Vol.  VI;  Geldmarkt,  Kreditbanken)  pp.  3-80. 

2 1 .  See  especially  the  fundamental  essay,  Die  Krisis  auf  dem  Arbeitsmarkt 
(Vol.  CIX  of  the  Schriften  des  Vereins  fur  Sozialpolitik,  and  Vol.  V  of  the 
exceedingly  valuable  inquiry  by  this  society  regarding  Die  Storungen  in 
deutschen  Wirtschaftsleben  wahrend   der  Jahre    1900  ff.)  with  contribu- 
tions by  J.  Jastrow,  A.  Heinecke,  R.  Calwer,  K.  Singer,  L.  Cohn,  Lands- 
berg,  and  W.  Bloch.     See  also  diagram  on  page  140  of  the  above-cited 
(note  17)  work  by  Theodore  Burton  (according  to  George  H.  Wood  in  the 
Journal  of  the  Royal  Statistical  Society,  1899)  for  the  employment  statistics 
in  the  United  Kingdom  for  1860-1900,  as  well  as  the  Annual  Extracts  of 
Labor  Statistics,  official  documents  compiled  by  the  Labor  Department  of 
the  Board  of  Trade. 

22.  See  Walter  Bagehot,  Lombard  Street,  ed.   1896,  p.  199:  "What  is 
wanted,  and  what  is  necessary  to  stop  a  panic  is  to  diffuse  the  opinion  that, 
though  money  may  be  dear,  still  money  is  to  be  had." 

23.  See  Ernst  Kritzler,  Preussische  Hypotheken-Aktien-Bank,  Deutsche 
Grundschuld-Bank,    Pommersche    Hypotheken-Aktien-Bank,    Krisis   und 
Sanierung.     Schriften   des  Vereins  fur  Sozialpolitik,   Vol.   CXI;    Krisen- 
enquete,   Vol.    II;   Storungen*  im   deutschen   Wirtschaftsleben,   Vol.  VII, 
1903,  pp.  1-82. 

24.  See  Kreuzzeitung  of  June  30,   1901,  No.  301  (ist  Supplement):  "It 
can  not  be  denied  that  the  Haute  banque  through  its  speedy  and  ener- 
getic protection  of  the  legitimate  commercial  credit,  especially  in  Saxony, 
greatly  lessened  the  consequences  of  the  Leipzig  catastrophe.     For  this 
action  it  should  be  accorded  all  thanks  and  recognition." 

25.  See   Moritz   Stroll    Uber   das   deutsche   Geldwesen   im    Kriegsfalle 
(Schmoller's  Jahrbuch,  Vol.  XXIII,  1899,  pp.  173-195  and  pp.  197-226). 
also  Die  finanzielle  Mobilmachung  der  deutschen  Wehrkraft,  by  Col.  Dr. 
Ritter  v.  Renauld  (Leipzig,   1901,  Duncker  &  Humblot),  and  the  article 
Finanzielle  Mobilmachung  by  the  same  author  in  the  Bank-Archiv,  fourth 
year,  No.  3,   of    December,    1904,  together   with    the   objections   in  the 
Deutscher  Okonomist  of  January  14,  1903  (twenty-third  year,  No.  1151); 
Karl  Helfferich,  Das  Geld  im  russisch-japanischen  Kriege  (Ernst  Siegfried 
Mittler  &  Sohn,  Berlin,  1906)  and  Die  finanzielle  Seite  des  russisch-japa- 
nischen Krieges  (Marine-Rundschau,  Oct.  1904);  Max  Schinckel,  Nationale 
Pflichten  der  Banken  und  Kapitalisten  im  Kriegsfalle  (Bank-Archiv,  fifth 


789 


National    Monetary     Commission 

year,  No.  4,  p.  41  et  seq.,  Nov.  15,  1905);  General  v.  Blume,  Militarpo- 
litische  Aufsatze  (Berlin,  1906,  Ernst  Siegfr.  Mittler  &  Sohn),  Chapter  I,  4: 
Mobilmachung.  Soziale  und  wirtschaftliche  Folgen,  pp.  14-30;  Max  War- 
burg, Finanzielle  Kriegsbereitschaft  u.  Borsengesetz,  paper  read  at  the  3d 
General  Congress  of  German  Bankers  at  Hamburg,  Sept.  7,  1907);  and 
Riesser,  Finanzielle  Kriegsbereitschaft  und  Kriegsfuhrung,  Jena,  Gust. 
Fischer,  1909. 

26.  See  Riesser,  ibidem,  p.  54. 

27.  See,  among  others,  Max  Schinckel:  Nationale  Pflichten  der  Banken 
und  Kapitalisten  im  Kriegsfall  (Bankarchiv,  Vol.  V,  No.  4,  Nov.  15,  1905), 
pp.  42-43;   Riesser,  loc.  cit.,  pp.  25-26,  and  the  discussion  in  Part  III, 
chapter  III,  Gd,  of  this  book. 

28.  See   Moritz   Stroll,    Uber   das   deutsche   Geldwesen   im    Kriegsfall. 
(Schmoller's  Jahrbuch  fur  Gesetzgebung,  etc.,  XXIII,  p.   176);  Riesser, 
loc.  cit.,  pp.  2-4  and  p.  41. 

29.  Riesser,  Finanzielle  Kriegsbereitschaft  und  Kriegsfuhrung,  1909,  pp. 

55-75- 

30.  Riesser,  loc.  cit.,  pp.  45~55- 

31.  Immediately  after  the  declaration  of  war,  this  war  treasure  is  to  be 
delivered  to  the  Reichsbank,  which,  according  to  section  17  of  the  bank 
law  of  March  14,  1876,  may  issue  the  threefold  amount  in  bank  notes — 
namely,  360,000,000  marks. 

As  an  increase  of  this  war  treasure  in  gold  is  scarcely  feasible  at  present, 
I  have  broached  the  question  (loc.  cit.,  p.  45,  note  i)  whether  a  further 
war  reserve  fund  of  120,000,000  marks  might  not  be  accumulated  in  silver. 

32.  Riesser,  loc.  cit.,  pp.  41-42. 

33.  Riesser,  loc.  cit.,  pp.  49-50. 

34.  In  contrast  with  Japan,  which  endeavored  at  the  very  outset  "to 
raise  as  large  a  possible  share  of  the  necessary  money  for  the  war  by 
means  of  increased  taxation"  (Helfferich,  Das  Geld  im  russisch-japanischen 
Kriege,  Berlin,  Siegfr.  Mittler  &  Sohn,  1906,  p.  143),  Russia  limited  her- 
self to  loans,  to  drawing  on  the  considerable  resources  available  in  her 
treasury,  and  to  diminishing  her  expenditure,  resorting  to  increased  taxa- 
tion only  in  order  to  cover  the  interest  on  the  war  loans.     See  also  Riesser, 
loc.  cit.,  pp.  96—101. 

35.  See  Riesser,  loc.  cit.,  pp.  5-11,  especially  p.  10. 

36.  In  this   matter   the   correct   determination   of   the  type  and  issue 
price  of  the  loan  is  of  the  greatest  importance.     (See  Riesser,  loc.  cit., 
pp.  98-99,  pp.  77-92.)     In  Germany,  unfortunately,  even  in  normal  and 
prosperous  times,  the  success  of  a  loan  subscription  has  frequently  been 
jeopardized,  to  the  detriment  of  government  credit,  by  the  failure  "  to  make 
momentary  sacrifices  in  order  to  secure  permanent  advantages,"  as  Russia 
has  frequently  done  to  her  own  advantage  during  times  of  peace  and  war 
(Helfferich,  loc.  cit.,  p.  89).     The  failure  of  the  5  per  cent  war  loan  of 
100,000,000  marks  in  July,  1870,  was  due  as  much  to  the  time  of  issue  as 
to  the  injudicious  selection  of  the  type  and  issue  price  of  the  loan  (the 


790 


The     German     Great    Banks 


latter  against  the  emphatic  advice  of  the  representatives  of  (he  banking 
world  consulted) ;  further,  it  was  ill  advised  not  to  make  the  banks  sub- 
scription offices,  although  they  only  represented  at  that  time  a  relatively 
small  financial  power.  (See  Riesser,  loc.  cit.,  102-103.) 

37.  See  Riesser,  loc.  cit.,  p.  28. 

38.  Important  conclusions  in  all  these  respects  may  be  drawn  from  the 
financial  policy  pursued  by  England  during  the  Boer  war  (October,  1899, 
to  May,  1902),  and  by  Russia  and  Japan  during  the  Russo-Japanese  war 
(February,  1904,  to  the  end  of  August,  1905).     (See  Riesser,  loc.  cit.,  pp. 
75-79,  and  p.  79,  2,  to  p.  93.)     I  refer  here  especially  to  the  "system  skil- 
fully adopted  by  the  Russian  financial  administration  of  procuring  at  home 
the  money  required  for  war  expenses  at  home  and  at  the  scene  of  war,  and 
of  procuring  by  foreign  loans  the  money  necessary  for  payments  abroad, 
thus  neither  depriving  the  internal  commerce  of  Russia  of  its  necessary 
currency  by  sending  money  abroad,  nor  menacing  the  foreign  money  mar- 
ket on  whose  good  feeling  she  depended,  by  drawing  on  it  for  large  amounts 
of  gold.     (Helfferich,  loc.  cit.,  p.  219.) 

39.  The   note   banks,    mortgage   banks    (including   the  "mixed"  mort- 
gage banks),  the  building,  brokers',  and  insurance  banks,  also  establish- 
ments exclusively  devoted  to  the  promotion  of  industrial  undertakings  are 
not  included  in  this  discussion. 

As  regards  the  remaining  "banks"  quite  a  variety  of  designations  have 
been  applied  to  them.  The  most  customary  term  is  probably  "credit 
bank,"  a  name  which  I  shall,  as  a  rule,  adhere  to  in  the  following  pages. 
Other  names  have  been  used,  however,  such  as:  "  industrial"  banks  (a  name 
largely  used  during  the  last  century);  "investment"  banks  (Plenge); 
"  security "  banks  (Schmoller  and  Sat  tier) ;  "banks  of  emission"  (Loeb); 
"enterprise"  banks  (Schaffle);  "speculation"  banks  (Weber);  "credit 
mobilier"  banks  (Max  Wirth).  Knies  (in  "Geld  und  Kredit,"  2nd  part, 
1879,  p.  223)  enumerates  still  more  specialised  designations:  "It  has  be- 
come customary  to  classify  the  banks  themselves  as  'loan'  banks,  'giro' 
banks,  'bill'  or  'discount'  banks,  'deposit',  'account  current', and  'cheque* 
banks",  etc.  To  my  mind,  however,  none  of  these  designations  can  lay 
claim  to  a  complete  characterisation  of  the  activity  of  German  banks  as 
historically  developed.  The  one  or  the  other  designation  applies  to  a  bank 
only  in  as  far  as  the  activity  implied  by  the  title  (speculation,  investment, 
emission,  or  security  transactions)  predominates  in  the  total  range  of  its 
business.  Even  this,  however,  does  not  generally  apply  to  the  whole  devel- 
opment of  each  individual  bank,  for  not  only  has  each  bank  developed 
quite  differently,  but  within  one  and  the  same  bank  the  character  and  ten- 
dency of  its  activity  during  the  different  phases  of  its  development,  consti- 
tuted sometimes  a  radical  departure  from  that  pursued  by  the  former  man- 
agement according  to  the  business  policy  pursued  by  the  new  management. 

If  we  proceed  from  the  distinction  between  simple  deposit  banks  and 
the  German  banks  which  by  reason  of  their  historical  development  are  of  a 
different  nature,  that  is  to  say,  if  we  desire  to  emphasise  that  the  latter  are 


791 


National    Monetary     Commission 

not  simply  deposit  banks  (as  is  A.  Weber's  evident  intention  in  his  com- 
parison between  "deposit"  and  "speculation"  banks),  it  would  seem  more 
appropriate  to  do  as  has  been  done  in  the  case  of  the  mortgage  banks,  for 
which,  since  the  mortgage  bank  law  of  July  13,  1899,  a  distinction  is  drawn 
between  mortgage  banks  proper,  and  those  carrying  on  miscellaneous 
transactions,  which  latter,  in  virtue  of  article  46,  section  i ,  are  exempt  from 
the  restrictive  regulations  of  article  5 . 

From  this  standpoint,  therefore,  the  existing  German  credit  banks  might 
be  designated  also  as  banks  transacting  miscellaneous  business  ("  combined  ' ' 
or  ' '  mixed ' '  banks) .  More  important,  however,  than  the  mere  formal 
question  of  definition,  is  the  conclusion  resulting  from  the  above,  that  the 
general  opinions  and  deductions  expressed  in  the  following  pages  regarding 
German  banks,  particularly  German  great  banks,  are  invariably  given  with 
the  tacit  understanding  that  the  general  description,  when  applied  in  detail, 
i.  e.,  with  regard  to  each  individual  bank,  may  be  subject  to  extensive  modi- 
fications. 

40.  This  has  been  the  case  hitherto  only  with  the  Disconto-Gesellschaft. 
See  Die  Disconto  Gesellschaft,  1851-1901,  Denkschrift  zum  50  jahrigen 
Jubilaum,  Berlin,  1901. 

Part  II. 

1 .  See  (in  addition  to  other  works  cited) :  Werner  Sombart,  Die  deutsche 
Volkswirtschaft   im   neunzehnten   Jahrhundert,  yth    ed.     (Berlin,    Georg 
Bondi),   1909,  and  Ludwig  Pohle,  Die  Entwicklung  des  deutschen  Wirt- 
schaftslebens  im  letzten  Jahrhundert,  2nd  ed.     (Leipzig,  B.  G.  Teubner), 
1908. 

2.  Gustav  Schmoller,  Grundriss  der  allgemeinen  Volkswirtschaftslehre, 
Bd.  II  (ist  to  6th  edition,  Leipzig,  1904,  Duncker  &  Humblot),  pp.  182  and 
183.     Schmoller  thinks,  however,  that  this  estimate  of  Prussia's  capital  is 
too  low. 

3.  In  Frankfort-on-the-Main  for  home-manufactured  goods,  notions,  and 
hardware,  according  to  an  interesting  book  by  Hugo  Kanter :  Die  Entwick- 
lung des  Handels  mit  gebrauchsfertigen  Waren  von  der  Mitte    des   18. 
Jahrhunderts  bis  1866  zu  Frankfurt  a.  M.     (Tubingen  and  Leipzig,  1902, 
J.  C.  B.  Mohr),  p.  125. 

4.  Werner  Sombart,  Der  moderne  Kapitalismus,  I,  pp.  429,  424-425. 
585,815  looms  were  used  in  the  home-weaving  industry,  and  only  217,388 
in  factories. 

5.  Von  Reden,  Erwerbs-  u.  Verkehrsstatistik  (1853),  p.  281,  and  Som- 
bart, Der  mod.  Kapitalismus,  I,  pp.  424-425. 

6.  In  the  weaving  trade  754,735  workmen  were  employed  in  home  indus- 
try, 325,277  in  factories.     (W.  Sombart,  Der  moderne  Kapitalismus,  I,  pp. 
424-425.) 

7.  W.   Oechelhauser,  Vergleichende    Statistik  der  Eisenindustrie  aller 
Lander  u.  Erorterung  ihrer  okonomischen  Lage  im  Zollverein,  1852,  pp. 
124  and  128. 

792 


The     German     Great     Banks 

8.  W.  Sombart,  Der  mod.  Kapitalismus,  vol.  I,  p.  462. 

9.  E.  Engel,  Das  Zeitalter  des  Dampfes,  2  ed.,  1881,  p.  130. 

10.  Karl  Lamprecht,  Zur   jtingsten  deutschen  Vergangenheit,  (Vol.  I, 
ist   half  of  his   Deutsche   Geschichte,    Freiburg  i.  B.,  Herm.  Heyfelder, 

1903),  P-  153- 

11.  Von  Reden,  loc.  cit.,  p.  281. 

12.  W.  Oechelhauser,  loc.  cit. 

13.  With  regard  to  the  following  remarks  see  Max  Sering,  Geschichte  der 
preuss.-  deutschen  Eisenzolle  von  1818  bis  zur  Gegenwart,  in  Schmoller's 
Staats    u.   Sozialwissenschaftl.  Forschungen,   vol.   Ill   (1882),   pp.   53-62. 
On  pp.  94-95  he  points  out  the  interesting  fact  that  the  financial  crisis  of 
1847  interrupted  the  transition  to  coke  fuel. 

14.  According   to   Liirmann   in   Die   Fortschritte   im   Hochofenbetrieb 
seit   50   Jahren,  Diisseldorf,   1902,  the   output   of   blasting   furnaces   has 
increased  sevenfold  since  1852  (in  capacity  expressed  in  tons).     According 
to  Peter  Mischler,  Das  deutsche  Eisenhuttengewerbe,  vol.  I  (1852),  p.  150, 
the  average  English  blasting  furnace  produced  in  the  middle  of  the  nine- 
teenth century  70,000  quintals  annually,  whereas  German  blasting  fur- 
naces only  averaged  7,000  quintals  annually,  as  compared  with  618,000  in 
1899. 

15.  W.  Sombart,  Der  mod.  Kapitalismus,  II,  pp.  13-14. 

1 6.  "  In  the  district  of  Siegen,  therefore,  the  iron  ore  production  has  in  50 
years  increased   twenty -five-fold   in   quantity,  thirty-one-fold  in  value." 
(See  Mollat,  Zur  Wiirdigung  der  Siegerlander  Industrie,  Siegen,  September, 
1908.) 

17.  Von  Reden:  Vergleichende  Kulturstatistik,  1848,  p.  412,  seq. 

18.  W.  Sombart,  Der  mod.  Kapitalismus,  vol.  II,  pp.  176-7. 

19.  See  Ludwig  Geiger,  Berlin,  1688-1840.     (Berlin,  Gebr.  Paetel,  1903), 
Vol.  i  (1903),  p.  463,  Note*. 

20.  See  Beitrage  zur  Geschichte  des  Berliner  Handels-  und  Gewerbe- 
fleisses  aus  der  altesten  Zeit  bis  auf  unsere  Tage.     A  memorial  in  com- 
memoration of  the  fiftieth  anniversary  of  the  corporation  of  the  Berlin 
Merchants  on  March  2,  1870,  p.  83.     In  December,  1908,  the  number  of 
persons  contributing  to  sickness  insurance  funds  in  Berlin  was  738,858. 

21.  W.  Sombart:  Der  mod.  Kapitalismus,  II,  pp.  176-177. 

22.  W.  Sombart,  II,  p.  214.     Concerning  the  population  of  to-day  see 
pp.  90  and  91. 

23.  Matches  were  introduced  only  in  1834,  and  sewing  machines  were 
first  used  in  Germany  at  the  beginning  of  the  sixties. 

24.  Max  Wirth,  Geschichte  der  Handelskrisen,  (2nd  ed.),  1874,  p.  292. 

25.  See  Sombart:  D.  mod.  Kap.  II.  pp.  284-7,  and  Otto    Bahr  Eine 
deutsche  Stadt  (Kassel)  vor  60  Jahren,  Leipzig,  Fr.  Wilh.  Grunow,  1884, 
p.  64  and  following. 

26.  See   K.   Knies:  Der  Telegraph   als  Verkehrsmittel,    1857,   p.    161, 
et  seq. 


793 


National    Monetary     Commission 


27.  Geschichte  der  Frankfurter  Zeitung  1856-1906,  p.  17. 

28.  See    Th.    Bauer:    Die    Aktienunternehmungen    in    Baden    (Karls- 
ruhe, 1903,  Macklotsche  Buchhandlung),  pp.  14  and  15,  for  the  conditions 
prevailing  in  Baden,  where  there  was  a  law  concerning  stock  companies 
already  at  the  beginning  of  the  nineteenth  century.     It  appears  that  the 
number  of  joint-stock  companies  in  Baden  before  the  middle  of  the  nine- 
teenth century  was  very  limited.     They  were  the  following:  The  spinning 
and  weaving   mills,  at   Ettlingen,  founded   in  1835;  the  Badische  Gesell- 
schaft  f.  Zuckerfabrikation  in  Waghausel  founded  in   1836;  the  Mecha- 
nische  Weberei, "  at  Thiengen,  founded  in  1843;  the  Badische  Gasaktien- 
gesellschaft,     founded    in     1845,     and    the    Karlsruher    Gasgesellschaft, 
founded  in  1848.     Beginning  with  1853  came  the  following:  Aktiengesell- 
schaft    fur  Uhrenfabrikation,    at    Lenzkirch,   founded    in    1853;   Verein 
chemischer  Fabriken,  at  Mannheim,   founded  in  1854;  the  French   Com- 
pagnie  de  Manufactures  de  Glaces,  etc.,  founded  in  1854,  for  the  manufac- 
ture   of     plate-glass;    the     Badische     Zinkgesellschaft,     at     Mannheim, 
founded  in  1855;  the  wire  and  screw  factory,  of  Falkau,  founded  in  1856; 
the  Badische  Gesellschaft  fur  Tabakproduktion  und  Handel,   at  Karls- 
ruhe, founded  in  1857;  and  some  other  companies  of  minor  importance. 
Bauer  only  mentions  one  large  concern  converted  into  a  joint-stock  company, 
namely  the  Maschinenbaugesellschaft  Karlsruhe,  founded  in  1848  and  con- 
verted in  1852. 

The  formation  of  companies  became  more  active  after  the  introduction 
of  the  industrial  law  of  1862,  which  was  based  on  freedom  of  trade  and 
freedom  to  move  about  from  place  to  place.  The  well-known  Badische 
Anilin-und  Sodafabrik,  at  Mannheim-Ludwigshafen,  was  founded  about 
this  period  (1865). 

29.  Engel,  Die  erwerbstatigen  juristischen  Personen,  etc.     Berlin,  pub- 
lished by  the  Royal  Statistical  Bureau,  1876,  pp.  lo-n. 

30.  See  Geschichte  der  Frankfurter  Zeitung,  1856-1906,  p.  15. 

31.  Karl  Helfferich,  Geschichte  der  Deutschen  Geldreform  (Leipzig,  1898, 
"^uncker  &  Humblot),  p.  6  seq.,  and  also  his  Beitrage  zur  Geschichte  der 
Deutschen  Geldreform,  p.  78  seq. 

32.  Hugo  Kanter,  loc.  cit,  pp.  112-113. 

33.  Hugo  Kanter,  loc.  cit.,  p.  41. 

34.  Rud.    Kaulla,    Die   Organisation    des    Bankwesens   im    Konigreich 
Wurttemberg,  1908,  p.  6. 

35.  W.  Sombart,  Die  Deutsche  Volkswirtschaft,  2d  ed.,  pp.  190-191. 

36.  "Geschichte  d.  Handelskammer  zu  Frankfurt  a.  M.,"  (1767-1908). 
Jos.  Baer  &  Co.,  Frankfort-on-the-Main,  1908,  p.  659. 

37.  W.  Sombart,  "Die  Deutsche  Volkswirtschaft,"  2.  Aufl.,  p.  196. 

38.  On  October  i,   1851,  even  the  Prussian  Bank  gave  notice  to  de- 
positors to  withdraw  their  deposits,  because,  according  to  W.  Sombart 
(Deutsche  Volksw.,  2d  ed.,  p.  85),  "it  did  not  know  what  to  do  with  the 
money."     At  the  commencement  of  the  second  period  (1870)  the  deposits 


794 


The     German     Great     Banks 


at  the  Prussian  Bank  amounted  to  only   15,770,000  thalers=47,3io,ooo 
marks. 

39.  See  Lexis,  "Banken"  (in  Handworterbuch  der  Staatswissenschaften, 
1903,  3d  ed.,  Vol.  II,  p.  400). 

40.  Karl  Lamprecht,  loc.  cit.,  p.  183. 

41.  Walter  Troeltsch,  Uber  die  neuesten  Veranderungen  im  deutschen 
Wirtschaftsleben.     Stuttgart,  W.  Kohlhammer,  1899,  pp.  32  and  45. 

42.  New  investigations,  and  the  remarks  made  by  Ludwig  Pohle,  loc. 
cit.,  p.  23,  suggested  this  modified  statement  as  compared  with  the  one  in 
the  second  edition. 

43.  Vide  Karl  Lamprecht  loc.  cit.,  p.  43. 

44.  W.  Sombart,  Der  mod.  Kapitalismus,  II,  pp.  148-151. 

45.  Ludwig  Pohle,  loc.  cit.,  p.  27. 

46.  "In    the   coal   and   iron   deposits   of   Germany   lies    *     *     *     the 
explanation   why   the  German   economic  world   turned   so   decisively   to 
industrial  activity  during  the  latter  half  of  last  century,  as  well  as  of  the 
intensity  of  Germany's  capitalistic  development."     (W.  Sombart,  Deutsche 
Volkswirtschaft,  2d  ed.,  p.  103). 

47.  See  Hans  Gideon  Heymann,  Die  gemischten  Werke  im  deutschen 
Grosseisengewerbe.     E.in  Beitrag  zur  Frage  der  Konzentration  der  Indus- 
trie, Stuttgart  &  Berlin,   1904,  J.  G.  Cotta  Nachf.     (Miinchener  Volksw. 
Studien,   edited  by  Brentano  and  Lotz,   65.  Stuck),   p.  4:  "It  was  the 
employment  of  mineral  coal  for  smelting  and  as  a  source  of  power  that 
paved  the  way  for  capitalism  and  large  industry."     (See  also  p.  62.) 

48.  See  Max  Wirth,  Geschichte  der  Handelskrisen,  2d  ed.,  p.  292. 

49.  Engel,  Die  erwerbstatigen  juristischen  Personen,  insbesondere  die 
Aktiengesellschaften   im    Preussischen    Staate.     (Berlin,    Verlag   des   kgl. 
statist.  Bureaus,  1876),  pp.  10-11. 

50.  It  can  not  be  proved  that  the  Credit  Mobilier  participated  financially 
in  the  founding  of  the  Darmstadter  Bank. 

51.  See  Geschaftsbericht  der  Darmstadter  Bank  for  1853,  page  9.     For- 
tunately the  idea  was  never  carried  into  practice. 

52.  Anonymous  article:  "Die  modernen  Kreditbanken,"  published  in 
1856  in  the  Deutsche  Vierteljahrsschrift,  No.  3  (Stuttgart  and  Augsburg, 
J.  G.  Cotta),  page  255  seq. 

53.  Conrad:  Grundriss  zum  Studium  der  politischen  Oekonomie.     (4th 
ed.,  Jena,  Gust.  Fischer,  1902),  part  i,  section  72  (p.  229  seq.):  "Die  Credit- 
Mobilier-oder  Emissions-  und  Industriebanken." 

54.  In  the  main,  the  theme  seems  to  have  been  furnished  by  the  Union 
generate  (Bontoux). 

55.  While  following  a  hearse  one  should  neither  philosophise  nor  try  to 
make  laws.     Had  Ihering  taken  this  to  heart  he  certainly  would  not  have 
marred  hi*  ^reat  work  "Der  Zweck  im  Recht"  by  the  following  gener- 
alisation written  immediately  after  the  crisis  of  1873:  "The  devastations 
which  they  (the  joint-stock  companies)  caused  among  private  property  are 


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worse  than  if  fire  and  famine,  failure  of  crops,  earthquake,  war,  hostile  occu- 
pation had  combined  to  ruin  the  national  prosperity."     (Vol.  i,  p.  223.) 

It  is  both  surprising  and  regrettable  that  Ruhland  quotes  my  words  in 
his  "System  der  polit.  Oekonomie"  (Vol.  Ill,  p.  8)  in  quotation  marks 
in  the  following  manner:  "Riesser's  desire"  *  *  *  "not  to  phi- 
losophise, nor  to  try  to  make  laws  when  following  a  hearse,  and  not  to 
select  the  effect  of  a  stock  exchange  panic  as  the  starting  point  of  a  reforma- 
tory action(\y  etc.  My  words  are  simply  a  warning  not  to  criticise,  to 
draw  philosophical  conclusions,  or  to  take  legal  action  immediately  after  a 
crisis;  that  is  to  say,  while  one  is  "following  the  hearse."  The  italicized 
passage  is  not  only  not  to  be  found  in  the  paragraph  quoted  by  Ruhland 
(footnote  3  on  p.  38  of  the  second — German — edition  of  this  book),  but  it 
does  not  even  remotely  represent  what  was  written  there — a  fact  which  will 
be  clear  to  every  careful  reader  of  my  book.  Keeping  the  above-mentioned 
facts  in  view,  we  can  correctly  estimate  the  scientific  basis  of  Ruhland's 
deduction  found  in  the  following  sentence:  " The  political  economist  whose 
duty  as  a '  physician '  is  to  cure  the  diseased  '  body-economic '  would  be  guilty 
of  the  most  criminal  neglect  if  (in  accordance  with  Professor  Riesser's  wishes) 
he  would  conceal  or  overlook  its  worst  and  most  threatening  symptoms!" 
He  evidently  forgets  that  it  is  one  of  the  first  elements  of  scientific  polemics 
not  to  construct  an  argument  on  absolutely  false  citations  and  then  pro- 
ceed to  combat  it. 

56.  M.   Aycard,   "Histoire  du  Credit  Mobilier,"   1852-1867,  Bruxelles, 
1867. 

57.  Joh.  Plenge,  Griindung  und  Geschichte  des  Credit  Mobilier.     Zwei 
Kapitel  aus  Anlagebanken,   eine  Einleitung  in  die  Theorie  des  Anlage- 
bankgeschaftes  (Tubingen,  H.  Laupp,  1903).     This  treatise,  intended  to  be 
the  precursor  of  a  larger  unpublished  work  treating  the  latter  theme  (theory 
of  the  investment  bank  business)  in  detail,  offers  far  more  than  the  title 
would  lead  one  to  infer,  and  is  characterised  by  an  abundance  of  interesting 
material  and  keen  observation. 

58.  The  increase  took  place  when  it  was  too  late  (1866);  the  capital  was 
then  doubled,  being  raised  to  120,000,000  francs.     The  reserves  amounted 
only  to  4,000,000  francs. 

59.  As  early  as  March  9,  1856,  the  Government  felt  obliged  to  prohibit 
any  further  issue  of  securities  on  the  Paris  Bourse.     According  to  Plenge 
(loc.  cit.,  p.  91),  no  less  than  457  new  limited  liability  companies  with  a 
combined  capital  of  1,000,000,000  francs  (not  100,000,000)  were  founded 
in  France  from  July  i,  1854,  to  July  i,  1855.     Among  these  companies 
there  were  227  joint-stock  companies  en  commandite,  with  a  capital  of 
968,000,000  francs. 

The  fusion  policy  in  the  field  of  industry,  announced  in  the  1854  report 
of  the  Credit  Mobilier  in  correct  anticipation  of  the  concentrative  tendencies 
inseperable  from  large-scale  industry,  was  only  carried  out  to  a  limited 
extent  by  the  company.  On  the  other  hand,  several  important  railways 
were  consolidated  by  its  assistance.  (See  Plenge,  loc.  cit.,  p.  104.) 


796 


The     German     Great     Banks 


60.  See  Plenge's  list  of  bourse  quotations,  loc.  cit.,  p.  in. 

61.  As  early  as  1859  the  Credit  Mobilier  had  about  77,000,000  francs 
of  securities  of  all   descriptions  in   its  possession,  while  its  capital  was 
60,000,000  francs,  and  its  reserves  2,000,000  francs.     In  1862  the  total  of 
these  holdings  (among  which  "rentes"  occupied  but  a  modest  place)  had 
grown  to  148,000,000  francs. 

The  advances  to  subsidiary  companies  amounted  to  29,500,000  francs  in 
1858,  and  to  nearly  73,000,000  francs  in  1866. 

62.  Ay  card,   who  has  a  keen  instinct  in  such  matters,   believes  that 
11,000,000  francs  represented  the  profits  solely  from  speculation  during 
1856.     This  sum  certainly  did  not  include  the  profit  on  issues,  such  as 
Plenge  mentions  (loc.  cit.,  p.  150). 

63.  3,910  kilometres  had  been  authorized  up  to  1851  and  14,227  kilo- 
metres up  to  1857.     (Plenge,  loc.  cit.,  p.  91  ) 

64.  See  Plenge's  list,  p.  59  seq.,  and  p.  62.     For  instance:  In  1852-1854 
French  Southern  Railway;   1854,  Austrian  State  Railway,  Paris-Mulhau- 
sen,  D61e-Salins;   1857,  Hungarian  Franz- Joseph  Railway,  Swiss  Central 
Railway,  and  West  Swiss  Railway,  Dauphine  Railways,  Russian  Railway, 
Cordova-Sevilla,  Spanish  Northern  Railway,  etc. 

65.  Ad.    Wagner,    Bankbriiche    u.    Bankkontrollen,    in    the    Deutsche 
Monatsschrift  fur  das  gesamte  Leben  der  Gegenwart  (ed.  Jul.,  Lohmeyer), 
ist  year,  No.   i.     (October,   1901),  pp.  74-85,  and  No.  2.     (November, 
1901),  pp.  248-258,  especially  p.  255.     For  the  contrary  view,  see,  amongst 
other  material,  the  Deutscher  Oekonomist  of  October  19,  1901,  and  Feb- 
ruary i,  1902;  also  Richard  Rosendorff,  Bankbriiche  und  Bankkontrollen, 
in  Hirth's  Annalen  des  Deutschen  Reiches,  1902,  No.  3,  pp.  182-197. 

66.  See  Plenge,  loc.  cit.,  p.  14.     As  a  matter  of  fact  the  French  Govern- 
ment frequently  adopted  a  rigorous  attitude  towards  the  Credit  Mobilier. 
It  prevented  the  issue  (announced  first  for  the  middle  of  September,  and 
subsequently  for  October  5,  1855)  of  240,000  bonds  at  500  francs,  nine  days 
before  subscription;  on  March  9,  1856,  it  prohibited  the  issue  of  any  fur- 
ther securities  on  the  Paris  Bourse;  in  its  charter  the  Credit  Mobilier  was 
even  forbidden  to  subscribe  to  foreign  public  loans  without  the  consent  of 
the  Government. 

67.  Loc.  cit.,  pp.  71-98,  sec.  10:  Der  Pariser  Credit  Mobilier  von  1852- 
1867.     In  criticizing  this  description  and  criticism  it  seems  to  me  that 
Plenge  (VII,  and  17)  is  rather  too  severe. 

68.  Loc.  cit.,  pp.  249-267. 

69.  Max   Wirth   in   his   Geschichte   der  Handels-Krisen    (published   in 
1857)  shows  by  his  strong  prejudice  against  the  German  Credit  Mobilier 
Banks  (which  is  conspicuous  in  some  chapters  on  almost  every  page)  that 
the  book  was  written  whilst  the  author  was  completely  under  the  influence 
of  the  serious  crisis  of  '57  and  the  speculative  excesses  preceding  it. 

70.  Section  10  as  well  as  sections  8,  n,  12,  16,  17,  18,  19,  21,  23,  30,  32, 
36,  and  40  were  formulated  somewhat  differently  by  resolution  of  the 
general  meeting  of  May  31,  1860. 


797 


National    Monetary     Commission 

71.  This  is.  expressly  referred  to  in  the  following  passage  of  the  program- 
like  business  report  of  the  Darmstadter  Bank  for  1853  (reprinted  above, 
p.  48):  "and  to  lend  its  cooperation  in  order  to  lead  enterprise  and  capital 
into  the  proper  channels,   corresponding  with   the  requirements  of  the 
moment."     It  is  obvious  that  the  wording  of  this  clause  is  too  restrictive 
and,  taken  literally,  is  economically  incorrect. 

72.  See  especially  article  5  of  the  statutes  of  the  Credit  Mobilier. 

73.  In  section  2   of  the  statutes  of  the  Berliner  Handelsgesellschaft, 
dated  July  2,  1856,  which  in  this  respect  were  far  more  comprehensive,  the 
object  of  the  company  was  stated  to  be  "the  carrying  on  of  banking,  com- 
mercial, and  industrial  business  of  every  description."     Its  activity,  in 
particular,   is   to   extend   to    "industrial   and   agricultural   undertakings, 
mining,  foundries,  canal,  road,  and  railway  building,  as  well  as  to  the  for- 
mation, combination,  and  consolidation  of  joint-stock  companies,  and  to 
the  issue  of  shares  and  bonds  of  such  companies." 

74.  In  1860  the  entire  wording  of  section  10  was  partly  changed  and 
partly  supplemented.     In  my  text,  following  a  well-founded  criticism  by 
Warschauer  (in  Conrad's  Jahrbiicher,  3d  series,  vol.  xxxi,  p.  705),  I  have 
made  considerable  abbreviations. 

75.  It  must  be  remembered  that  up  to  the  introduction  of  the  "Allg. 
Deutsch.  Handelsgesetzbuch"  (1862),  that  is  to  say,  during  the  first  decade 
of  the  activity  of  the  Darmstadter  Bank,  the  management  was  not  in  the 
hands  of  the  directorate,  which  was  merely  an  executive  organ,  but  solely 
in  the  hands  of  the  "bank  administration,"  consisting  of  18  members. 

76.  Max  Wirth,  "Geschichte  der  Handelskrisen,"  2d  ed.,  pp.  244  and  295. 

77.  Max  Wirth,  loc.  cit.,  p.  296. 

78.  A  few  years  later,  in  1866,  as  already  noted,  similar  conditions  pre- 
vailed in  England,  which,  after  having  passed  through  the  crises  of  1825, 
1836,  1839,  and  1847,  underwent  another  serious  crisis  in  1866. 

79.  Business  report  for  1853  (program),  pp.  7  and  10. 

80.  It  is  therefore  incorrect  to  state  that  the  bank  was  "compelled"  to 
establish  branches  and  limited  liability  companies  "merely  in  order  to  invest 
its  capital  profitably"  (Max  Wirth,  loc.  cit.,  p.  272).     The  "half  bankrupt 
calico  factory  at  Heidenheim,"  with  the  transformation  of  which  into  a 
joint-stock    company   Max  Wirth   reproaches  the  bank,   remarking  that 
"nothing  has  been  heard  of  its  profits  as  yet,"  is  the  present  flourishing  and 
highly  respected  Wiirttemberg  Calico  Joint  Stock  Company   (Aktienge- 
sellschaft  Wiirttembergische  Kattunmanufaktur)  at  Heidenheim   (Wiirt- 
temberg). 

81.  See  Felix  Hecht,  Bankwesen  und  Bankpolitik  in  den  siiddeutschen 
Staaten,  etc.,  pp.  166-167. 

82.  Others  were  planned  in  St.   Petersburg,   London,   Constantinople, 
Smyrna,  and  Prague. 

83.  Most  of  the  other  banks  participated  herein,  or  they  acted  inde- 
pendently, although  the  latter  case  occurred  only  to  a  small  extent  during 
this  period.     For  details  see  p.  71  et  seq. 


798 


T  h  e     German     Great     Banks 

84.  On  one  occasion,  it  is  true  (1859),  tne  Darmstadter  Bank  was  induced 
to  make  long-term  advances  amounting  to  4,500,000  florins  to  industrial 
concerns   and   railways,    sustaining   great   losses   thereby.     In   this   case, 
however,  it  obtained  securities  the  value  of  which  fell  to  an  extent  not 
anticipated,  and  it  was  unable  to  obtain  supplementary  security.     (See 
Model,    Die    grossen    Berliner    Effektenbariken — ed.    Ernst    Loeb — Gust. 
Fischer,  Jena,  1896,  pp.  60-6 1.) 

85.  The  real  increase  amounted  merely  to  46,000  florins,  so  that  the 
capital  from  1856  on  was  25,046,000  florins=42, 936,000  marks;  the  cer- 
tificates (Berechtigungsscheine)  which  had  been  issued  beyond  that  amount 
had  to  be  gradually  withdrawn.     The  issue  of  these  certificates  was  accom- 
panied by  rather  unpleasant  occurrences.     (See  Model,  loc.  cit.,  p.  58.) 

86.  It  reduced  its  "lombard  and  covered  credits"  from  1,400,000  florins 
in  1859  to  90,000  florins  in  1864;  its  loans  and  mortgages  from  4,710,000 
florins  in  1859  to  400,000  florins  in  1864,  and  its  "illiquid  claims"  from 
910,000  florins  in  1859  to  114,000  florins  in  1864. 

87.  See  the  interesting  report:  Die   Disconto-Gesellschaft,    1851-1901, 
Denkschrift  zum  funfzigjahrigen  Jubilaum"  (Berlin,  1901,  J.  Guttentag), 
p.  15  (quoted  hereafter  as  "Jubilaumsbericht"). 

88.  The  dividends   which   the   Darmstadter   Bank   and   the   Disconto- 
Gesellschaft  distributed  during  1856-1900  have  been  compiled  in  a  table  by 
Ad.  Weber,  Depositenbanken  und  Spekulationsbanken,  Duncker  &  Hum- 
blot,  Leipzig,  1902,  pp.  209-210,  those  of  the  Disconto-Gesellschaft  also  in 
its  Jubilee  Report,  p.  261. 

89.  During  the  first  fifty  years  of  its  existence  (1853-1903)  7T%  per  cent. 

90.  For  the  period  from  April  i,  1856,  to  December  31,  1900,  9.51  per 
cent;  from  April  i,  1856,  to  1904,  9.42  per  cent. 

91.  Model,  loc.  cit.,  p.  68,  gives  a  table  of  the  current  business  of  the 
Darmstadter  Bank  during  1859-1864  and  emphasizes  that  the  management 
attached  the  greatest  value  to  "  fostering  and  extending  the  current  account 
business,  and  to  carrying  out  long  engagements."     This  table,  however, 
appears  to  me  to  prove  the  latter  tendency  rather  than  the  former,  although 
the  former  also  existed.     The  current  business  of  the  Darmstadter  Bank 
yielded,  in  1856,  8  per  cent  of  the  total  profit  of  15  per  cent. 

92.  Of  the  other  banks  Model  only  mentions  the  Berliner  Handelsge- 
sellschaft.     I  profit  by  the  opportunity  to  express  my  best  thanks  to  these 
banks  for  supplying  me  with  their  business  reports  for  the  earlier  period, 
of  which  reports  in  most  cases  only  few  copies  are  in  existence,  and  these 
in  some  instances  only  in  manuscript  form. 

93.  The  item  "debits"  (Debitoren),  which  decreased  in  1867  and  still 
further  in  1868  and  1869,  rose  to  30,526,471  marks  in  1870  and  to  62,771,967 
marks  in  1871. 

94.  The  deposits,  which  rose  to  7,466,212  marks  in  1867  (as  against 
2,716,187  in  1866)  fell  in  1868  to  4,384,850  marks  and  in  1869  as  low  as 
the  amount  given  above  (2,274,228  marks).     They  increased  again  in  1870 
to  3,676,343  marks,  rose  in  1871  suddenly  to  14,779,269  marks,  and  in  1873 


799 


National    Monetary     Commission 


as  high  as  64,788,366  marks  without,  however,  being  able  to  maintain  that 
level  during  the  following  years. 

95.  At  its  very  first  meeting  (30  October,  1848)  the  supervisory  council, 
at  the  suggestion  of  the  board  of  directors  of  the  bank,  had  fixed  4,000,000 
thalers  as  the  limit  for  individual  credit,  2,000,000  thalers  for  deposits  to 
be  accepted,  1,000,000  thalers  for  its  own  securities  (eigene  Effekten),  and 
1,000,000  thalers  for  its  own  bills  (Geldanweisungen)  (see  Ernst  Koenig's 
Erinnerungsschrift  zum  5o-jahrigen  Bestehen  des  A.  Schaaffhausen'schen 
Bankvereins  vom  Oktober  1898,  p.  26). 

96.  On  this  point  the  board  of  directors  remarks  in  its  business  report  for 

1852,  page  i:  "We  heartily  welcome  every  new  and  large  establishment 
in  this  town  and  country,  being  convinced  that  in  the  course  of  years  the 
prosperity  of  the  Bankverein  will  become  inseparable  from  the  growth  and 
and  rise  of  the  Rhenish  industry  in  all  its  branches."     (See  business  report 

1853,  P-  3-) 

97.  "For  the  exploitation  of  the  rich  coal  mines  of  the  Essen  field." 
(Business  report  for  1852,  p.  3.) 

98.  From  1864  onward  only  the  total  sums  are  given,  the  number  of 
accounts  being  omitted. 

99.  No  details  can  be  found  for  the  earlier  years.     In  1852  the  average 
debit  on  current  account  was  6, 804  thalers  and  the  average  credit  account. 
5,255  thalers. 

100.  The  business  report  of  that  year  (the  one  preceding  the  crisis  of  1857) 
mentions  that  at  the  end  of  September  "  the  Prussian  Bank  for  several  days 
refused  to  discount  anything." 

101.  As  far  as  balancing  the  accounts  is  concerned,  section  57  of  the 
statutes  deserves  special  attention.     It  provided  that  "  the  inventory  to  be 
compiled  annually  shall  represent  the  capital  of  the  society  according  to 
its  true  value;  the  capital,  if  anything,  should  be  underestimated  rather 
than  overestimated." 

102.  This  is  shown  in  the  business  report  of  1860,  page  2. 

103.  One  noteworthy  fact  disclosed  by  the  business  reports  of  the  bank 
is  that  during  the  whole  of  the  first  period  a  10  per  cent  share  in  the  net 
profits  was  paid  to  its  founders.     Another  circumstance  worth  recording 
is  that  at  the  ordinary  general  meeting  held  in  1860  a  shareholder  expressed 
the  desire  that  (p.  3  of  the  minutes)  "in  the  future  the  dividends  of  the 
bank  should  be  determined  by  the  board  of  management,  and  not  by  the 
general  meeting." 

104.  For  the  other  reductions  and  increases,  see  the  Jubilee  Business 
Report  of  the  Mitteldeutsche  Credit-Bank  for  1905  (1856-1906),  page  2. 

105.  Syndicates  of  private  bankers  existed  earlier. 

106.  A  syndicate  under  the  leadership  of  the  Disconto-Gesellschaft  was 
formed  among  the  Berlin  bankers  and  banking  firms  during  the  same  year 
(1859)  in  order  to  take  over  a  part  of  the  3o,ooo,ooo-thaler  loan  necessary 
for  the  mobilization  of  the  Prussian  army;  this  was  the  first  step  toward 


800 


The     German     Great    Banks 


the  formation  of  the  so-called  "Prussian  Syndicate."     (See  Jubilee  Report 
of  the  Disconto-Gesellschaft,  p.  29.)     (See  above,  p.  62.) 

107.  Nevertheless  the  business  report  of  the  Darmstadter  Bank  as  early 
as  1862  (pp.  1 1-12),  and  the  reports  following,  contained  a  list  of  the  classes 
of  securities  and  their  amounts,  the  amounts  of  former  years  being  added 
for  comparison.     The  list  comprised  (i)  American  bonds,  (2)  government 
securities  and  lottery  tickets,    (3)   preference  bonds,    (4)   railway  bonds, 
(5)  note-issuing  banks'  stock,   (6)  credit  and  discount  banks'  shares,   (7) 
stock  in  shipping  companies,  (8)  municipal  and  mortgage  bonds. 

108.  See,  for  example,  the  business  report  of  the  Darmstadter  Bank  for 
1855,   page  6:  "We  can  not,   however,   promise  rapid  successes  in  this 
direction  (industry)     *     *     *     and  can  not  satisfy  oversanguine  views." 
Business   report   for    1857,    page    2:  "The   excessive   expectations  which 
swindlers  have  based  on  these  new  developments  (the  'Industrial  Banks') 
will  certainly  not  be  fulfilled." 

109.  Felix  Hecht,  Bankwesen  und   Bankpolitik  in  den  siiddeutschen 
Staaten,  1819-1875  (Jena,  Gustav  Fischer,  1880),  page  172 

no.  Particularly  through  the  revolution  of  1848,  the  war  with  Den- 
mark in  1849,  the  Russian-Turkish  war  of  1853,  the  Crimean  war  of  1854, 
the  Austrian  war  against  Italy  of  1859,  the  American  war  of  secession, 
1861-1865,  the  French-Mexican  war  of  1861-1867,  the  Austrian-Prussian 
campaign  against  Denmark,  1864,  and  the  Prussian  war  against  Austria 
and  her  allies  in  1866. 

in.  Especially  through  the  crises  of  1856,  1857,  and  1866. 

Part  III. 

1.  Law  relating  to  the  coining  of  imperial  gold  coins,  December  4,  1871 ; 
coinage  law  of  July  9,   1873,  with  additions  of  July  9,   1873,  January  6, 
1876,  and  June   i,    1900;  law  relating  to  the  issue  of  imperial  trtasury 
notes  of  April  30,  1874;  supplementary  law  of  June  5,  1906  (section  relating 
to  lo-mark  and  5 -mark  notes);  and   decree  concerning  the  introduction 
of  the  imperial  gold  standard  of  September  22,  1875. 

2.  Law  relating  to  the  constitution  of  law  courts  of  January  27,  1877, 
and  May  17,  1898;  civil  procedure  law  of  January  30,  1877,  and  May  17, 
1898;  criminal   procedure   law  of  February    i,    1877;  bankruptcy  law  of 
February  10,  1877,  and  May  17,  1898,  law  concerning  matters  of  voluntary 
jurisdiction  (freiwillige  Gerichtsbarkeit)  of  May  17,  1898. 

3.  Military  service  law  of  November  9,  1867,  with  supplementary  laws 
of  February  u,  1888,  February  8,  1890,  and  April  15,  1905;  military  law  of 
May  2,  1874,  amended  by  the  laws  of  May  6,  1880,  March  1 1,  1887,  January 
27,  1890,  May  26,  1893,  March  25,  1899,  and  partly  through  the  code  of 
civil  law;  the  control  law  of  February  15,  1875,  law  concerning  voluntary 
jurisdiction  (freiwillige  Gerichtsbarkeit)  in  the  army  and  navy  of  May  28, 
1901,  and  decree  of  February  20,  1890;  military  penal  code  of  June  20,  1872; 
military  criminal  procedure  law  of  December  i,  1898. 


90311°— ii 52  801 


National    M  o  n  et  ar  y     Commission 

4.  Bank  law  of  March   14,    1875,  with  amendments  of  December   18, 
1889,  June  7,  1899,  and  June  i,  1909;  statutes  of  the  Reichsbank,  May  21, 
1875,  with  decree  of  September  3,   1900;  law  concerning  the  issuing  of 
bank  notes  of  December  21,  1874,  law  of  February  20,  1906,  regarding  the 
issue  of  bank  notes  in  denominations  of  20  and  50  marks. 

5.  Section  125  et  seq.  of  the  constitution  of  law  courts  act,  and  act  as 
to  seat  of  the  supreme  court  (Reichsgericht)  dating  nth  April,  1877, 

6.  The  words  which  were  here  added  in  the  second  edition,  "combined 
with  the  victorious  advance  of  large-scale  manufacture  in  almost  all  branches 
of  industry,"  had  to  be  struck  out  after  the  publication  of  the  statistical 
material  in  the  essay  of  A.  Saucke:  "Hat  neuerdings  der  Grossbetrieb  auf 
Kosten    des    Kleinbetriebs   in   der    deutschen    Industrie    zugenommen?" 
(Has  large-scale  industry  recently  increased  in  Germany  at  the  expense  of 
small-scale  industry?)     (Conrad's  Jahrbucher,  III  series,  vol.  31,  pp.  222- 
223);  for  although  in  certain  branches  large-scale  production  doubtless 
increased  greatly  at  the  cost  of  small-scale  production  even  during  the 
second  period,  yet  these  statistics  prove  that  in  German  industry  (subject 
to  accident  insurance)  as  a  whole,  an  increase  of  large-scale  production  at 
the  expense  of  small-scale  production  has  not  taken  place,  "at  least  not 
during  the  fifteen  years  from  1888-1903,"  that  is  to  say,  during  a  consider- 
able part  of  the  second  period.     In  agriculture,  it  is  true,  the  number  and 
area  of  the  great  landed  properties  have  greatly  increased,  especially  in 
East    Prussia;  the    small    and    middle  sized    farms,   however,   show    the 
greatest  increase. 

7.  See  Ludwig  Pohle,  loc.  cit.,  pp.    140-141,  and  the  table  printed  there. 

8.  See  Ernst  von  Halle,  Die  Deutsche  Volkswirtschaft   an   der  Jahr- 
hundertwende    (Berlin,    Ernst    Siegfr.    Mittler    &    Sohn,    1902),    p.    73. 
According  to  the  statistical  annual  for  the  German  Empire  (twenty-ninth 
year,  1908),  p.  26,  Tab.  13  d.,  and  p.  25,  note  i,  the  oversea  emigration  of 
Germans  via  German  and  foreign  ports  in  1907  amounted  to  31,696  persons, 
whereas  the  immigration  via  German  ports  into  Germany  amounted  to 
217,812  persons. 

9.  See  table  in  Ludwig  Pohle,  loc.  cit.,  p.  146,  under  II. 

10.  See  Materialien  zur  Beurteilung  der  Wohlstandsentwicklung  Deutsch- 
lands  im  letzten  Menschenalter  (supplementary  Volume  III  of  the  German 
Finance  Reform  Bills  of  1908),  p.  50. 

n.  See  W.  Sombart,  Der  moderne  Kapitalismus.     II,  p.  214. 

12.  In  the  Palatinate  (Bavarian),  according  to  Emil  Herz,  loc.  cit.,  p. 
44,  the  development  proceeded  on  the  same  lines.     Thus  the  number  of 
inhabitants  of  Kaiserslautern  was  48,306  in  1900,  as  compared  to  8,250  in 
1842;  that  of  Pirmasens  was  30,194  in  1900,  as  compared  to  6,410  in  1842. 

13.  See  report  of  Die  Aeltesten  der  Kaufmannschaft  in  the  Berliner 
Jahrbuch  fur  Handel  und  Industrie  for  1904,  I,  p.  26. 

14.  Ad.  Wagner,  Zur  Methodik  der  Statistik  des  Volkseinkommens  und 
Volksvermogens    (in   the  Zeitschrift   des   Kgl.    Preuss.    Statist.    Bureaus, 
forty-fourth  year,  1904,  p.  41-122),  and  in  his  expert  report  to  the  Imperial 


802 


T h  e     German     Great    Banks 


' 


Treasury,  published  on  the  occasion  of  the  German  Finance  Reform  Bills 
of  November,  1908  (No.  1043),  in  the  "Materialien  zur  Beurteilung  der 
Wohlstandsentwicklung  Deutschlands  im  letzten  Menschenalter,"  under  II, 

I  p.  122-132. 

15.  A  calculation  of  this  kind  made  solely  on  the  basis  of  population  is, 
open  to  objection,  however,  because  different  conditions  prevail  in  different 
parts  of  Germany. 

16.  In  the  Grenzboten,  No.  28,  of  July  9,  1908,  pp.  55-57. 

17.  In  the  "Woche"  of  August  23,  1906,  No.  34  (also  in  the  Konserv- 
ative  Monatsschrift  of  October,  1908). 

18.  In    the    "Tagliche    Rundschau"    of    1908,    No.    541      Individual 
incomes  are  computed  in  this  case  on  the  basis  of  insurance  statistics. 

19.  "Zur    Reichsfinanzreform,"    Berlin    (October),     1908.     Here,    too, 
insurance  statistics  are  made  the  starting  point  for  the  estimate  of  the 
value  of  various  kinds  of  property;  similarly  in  the  essay,  "350  Milliarden 
deutsches  Volksvermogen"  (Berlin,  Otto  Eisner,  1909) 

20.  Differences  of  many  billions  of  marks  are  also  found  in  examining 
the  several  items.     Thus,  the  value  of  capital  invested  in  foreign  enter- 
prises and  in  foreign  securities  during  1904-1905  is  estimated  at  a  minimum 
of  24,000,000,000  to  25,000,000,000  marks  in  the  memorial  of  the  admiralty 
of  December,    1905,   "Die  Entwicklung  der  deutschen  Seeinteressen  im 
letzten  Jahrzehnt,"  and  by  Ballod  likewise  at  25,000,000,000  marks,  whereas 
Steinmann-Bucher  estimates   the  amount  at  40,000,000,000   marks.     It 
must  also  be  borne  in  mind  here  that  in  1892-93  the  Prussian  Finance 
Minister   von   Miquel   estimated   the   amount   of   Prussian   capital   alone 
invested   in   foreign   securities   at    1^5,000,000,000   marks    (Abgeordenten- 
Haus.  1 7  Legisl.  Session,  5th  sess.,  appendix  to  the  stenographic  reports  No.  6, 
pp.  535-536),  an  amount  that  was  excessive.    The  "  Deutscher  Oekonomist" 
of  June  27,  1908   places  the  amount  of  foreign  securities  in  German  hands 
at  10,000,000,000  to  15,000,000,000  marks,  Sombart  (Deutsche  Volkswirt- 
schaft,  2d  ed.,  p.  416)  at  12,500,000,000  to  13,000,000,000  marks.     The 
value  of  German  capital  in  foreign  enterprises  is  estimated  in  the  admir- 
alty memorial  mentioned  above  at  7,700,000,000  to  9,200,000,000  marks 
(1905),  and  the  value  of  German  capital  invested  in  foreign  securities  at 
a  minimum  of  16,000,000,000  marks. 

21.  Thus  it  is  evident,  in  particular,  that  in  the  income-tax  laws  of  the 
various  German  Federal  States  possessing  a  general  and  direct  income 
tax  quite  different  principles  exist  for  declaration,  assessment,  and  control 
of  incomes,  as  well  as  for  the  exemption  of  small  incomes  from  taxation, 
and  that  in  regard  to  the  computation  of  the  value  of  property  not  subject 
to  income  tax,  other  great  divergences  may  arise.      It  need  hardly  be 
emphasised  that  in  this  case  as  well,  a  simple  calculation  of  the  German 
figures  on  the  basis  of  the  Prussian  results,  and  according  to  the  propor- 
tion of  population,  is  open  to  objection.     Steinmann-Bucher,  in  his  latest 
work  (350  Milliarden  deutsches  Volksvermogen,  Berlin,  1909),  places  the 
German  national  income  at  not  less  than  35,000,000,000  marks  (p.  107) 


803 


National    Monetary     Commission 

22.  Grundriss,  6th  ed.,  vol.  II,  p.  184  (at  the  end). 

23.  This  includes  an   amount   of    150,000,000   marks   for   annual  new 
deposits  in  cooperative  banks  ("Genossenschaftsbanken"),  which,  being 
mostly  made  by  owners  of  capital  under  6,000  marks,  are  generally  exempt 
from  the  tax  on  capital.     This  gives  for  Prussia  1,850,000,000  marks,  or 
(computed  at  three-fifths  for  the  whole  Empire)  3,080,000,000  marks  for 
Germany.     This  amount  is  further  increased  by  the  annual  new  deposits 
in  the  savings  banks  (which  as  a  rule  are  also  exempt  from  the  tax  on 
capital)  of  620,000,000  marks  (conservatively  estimated),  which,  without 
counting  property  not  assessed  for  the  tax  on  capital,  gives  the  amount 
quoted  above,  of  3,700,000,000  marks      The  author  proves  this  calculation 
by  pointing  out  that  there  is  an  annual  issue  of  stock  exchange  securities  to 
the  value  of  3,150,000,000  to  3,200,000,000  marks. 

24.  This  applies  especially  to  the  estimate  of  the  French  national  wealth 
made   by   Mulhall    (1895)    at    198,000,000,000,    by   de   Foville    (1902)    at 
161,600,000.000,   by  Yves  Guyot  at    190,400,000,000   marks,   by   Leroy- 
Beaulieu    (1906)   at   205,000,000,000  to    210,000,000,000   marks,    and   by 
Edmond  Thery  ("Les  Progres  economiques  de  la  France,"  6th  ed.,  Paris, 
1908,  p.  322  seq.)  for  the  year  1906  at  201,000,000,000  francs,  equaling 
161,000,000,000  marks. 

The  French  national  income  was  estimated  by  Leroy-Beaulieu  at 
20,000,000,000  marks. 

The  same  is  true  of  the  national  wealth  of  Great  Britain  and  Ireland, 
estimated  by  Sir  Robt.  Giffen  (1885)  at  about  204,500,000,000  marks,  by 
Mulhall  (1895)  at  about  235,000,000,000  marks,  and  by  L.  G.  Chiozza  Money 
(in  1908  for  1902-3)  at  about  228,000,000,000  marks.  In  all  probability 
the  same  is  true  of  the  official  estimate  (evidently  very  conservative)  made 
jn  1904  of  the  "true  value"  of  the  national  wealth  of  the  United  States  of 
America  (with  about  83,000,000  inhabitants),  which  is  given  by  the  Cen- 
sus Office  of  the  Department  of  Commerce  and  Labor  as  $107,000,000,000, 
or  430,000,000,000  marks,  for  1904. 

Under  such  circumstances,  owing  to  the  complete  difference  of  bases, 
principles,  and  statistical  methods,  any  comparison  of  these  foreign  esti- 
mates with  German  estimates  of  national  wealth  and  income  would  be 
still  more  objectionable,  although  such  comparisons  (with  the  necessary 
reservations)  are  occasionally  desirable  and  useful  in  many  directions. 

25.  According  to  the  above-mentioned  Appendix  III.  to    the  German 
finance  reform  bills  of  1908:  Materialien  zur  Beurteilung  der  Wohlstands- 
entwicklung  Deutschlands  im  letzten  Menschenalter,  pp.  4-15;  but  with 
the  reservations  mentioned  above,  and  on  pp.  2  to  4  of  the  "Materialien." 

26.  See  especially  Appendix  IV,  of  the  Reichstagsdrucksachen,  No.  1887: 
Materialien  zur  Beurteilung  der  Zusammenhange  zwischen  dem  offent- 
lichen  Schuldenwesen  u.  dem  Kapitalmarkt,  pp.  247-249. 

27.  Jahrbuch  fur  Handel  und  Industrie,  1907,  vol.  I,  p.  213. 

28.  See  page  248  of  the  "Materialien,"  cited  in  Note  26:  "The  exact 
amount  of  the  very  considerable  capital   that  has  migrated  abroad  for 
investment  in  securities  can  not  be  estimated  even  approximately." 

804 


The     German     Great     Banks 


29.  Deutscher  Oekonomist  of  June  27,   1908  (twenty-sixth  year),  page 
395,  where  objections  are  also  raised  against  the  employment  of  the  table 
described  in  the  text. 

30.  Appendix  to  the  Reichstagsdrucksachen  No.  1087  of  1908,  pp.  247 
and  248. 

31.  See  appendix  to  the  Bank  Inquiry,  1908-9:   Zur  Frage  der  Emis- 
sionsstatistik,  Berlin,  1909,  pp.  6-7. 

32.  See  inter  alia:  Ernst  v.  Halle:  Die  deutsche  Volkswirtschaft  an  der 
Jahrhundertwende,    Berlin,    1902,   pp.   56-57,   and  Mor.   Stroll,   loc.   cit., 
p.  194. 

33.  In  the  Zeitschrift  des  Kgl.  Preussischen  Statistischen  Bureaus,  forty- 
fourth  year,    1904,   page  92.     In  that  passage   Ad.    Wagner  avoids  the 
expression  which  he  repeatedly  uses  in  his  essay:  "Die  Reichsfinanznot," 
Berlin,  1908  (for  instance,  pp.  13-14  and  41),  where  he  speaks  of  the  ele- 
ments or  classes  "enriching  themselves"   (instead  of  "the  elements,   or 
classes  who  have  become  richer"),  words  which  convey  the  idea  that  the 
very  fact  of  growing  richer  is  a  reproach,  an  utterance  which,  while  cor- 
responding to  a  strong  popular  impression,  is  not  on  that  account  any 
more  correct.     It  is  also  stated  (p.  23),  "  that  the  middle  as  well  as  the  upper 
classes  ought  not  only  to  be  compelled  to  pay  the  same  amount  of  taxes 
in  proportion  to  their  capacity,  especially  as  measured  by  their  income, 
as  the  lower  classes,  but  that  they  should  pay  proportionately  more." 
This  statement  should  be  compared  with  the  proof  given   (for  Prussia 
only,  and  not  for  the  whole  Empire)  by  the  Prussian  Minister  of  Finance 
Freiherr  von  Rheinbaben  in  the  Prussian  Lower  House  on  January  20, 
1909  ("Reichsanzeiger,"  January  21,   1909),  which  has  been  amply  con- 
firmed by  the  official  verification  of  the  results  of  the  assessment  for  the 
Prussian  income  tax  of  1908  (ist  suppl.  of  the  "Reichsanzeiger"  of  Feb- 
ruary   n,    1909,   No    36).     According  to  this  statement  there  were,   in 
1908,  17,957,848  persons  completely  exempt  from  taxation  (their  incomes 
not  exceeding  900  marks),  or  42.22  per  cent  of  the  population,  which  in  1908 
numbered  38,026,556  souls.    Of  the  balance  of  the  population,  16,176,674, 
or  42.54  per  cent  of  the  Prussian  population,  were  assessed  in  the  lowest 
group  of  income  taxpayers  (with  incomes  over  900  and  less  than  3,000  marks) ; 
this  class  paid  a  total  of  83,752,973  marks,  or  34.26  per  cent  of  the  whole 
assessed  amount  of  income  tax.      Thus  there  remained   only   2,000,000 
(1,916,901),  equal  to  5.5  per  cent  of  the  population,  who  paid  not  less  than 
66  per  cent  of  the  entire  income  tax.     Out  of  these  2,000,000,  the  persons 
having  an  income  of  over  9,500  marks  constituted  only  0.87  per  cent  of  the 
population,  while  paying  43  per  cent  of  the  entire  income  tax.     To  this  the 
municipal  taxation  must  be  added,  so  that,  as  far  as  Prussia  is  concerned 
(and  similar  conditions  probably  prevailed  in  other  Federal  States),  there 
is  no  ground  for  Wagner's  statement  that  it  may  be  doubted,  whether  taxa- 
tion according  to  capacity  is  realized  in  the  legislation  of  the  Empire,  Fed- 
eral States,  and  municipalities.     Trade,  commerce,  and  industry,  which 


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pay  by  far  the  greatest  part  of  the  taxes,  are  also  burdened  with  the 
tremendous  burden  put  on  them  by  "social"  legislation. 

34.  "Die  Reichsfinanznot  u.  die  Pflichten  des  Deutschen  Volks  wie 
seiner  politischen  Parteien.  Bin  Mahnwort  eines  alten  Mannes"  (Berlin, 
Puttkammer  &  Miihlbrecht,  1908),  p.  14. 

35  See  inter  alia  the  minutes  of  the  meetings  of  the  Bank  Inquiry 
Commission,  concerning  points  III-V  of  the  list  of  questions;  1909,  p.  86. 

36.  Thus  in  Prussia,  according  to  the  Reichsanzeiger  of  February  n, 
1909,  from  1907  to  1908  alone  the  income-tax-paying  population  increased 
in  the  proportion  of  4,445  to  4,758. 

37.  According  to  the  calculations  of  R.  B.  May  (in  Schmoller's  Jahrb. 
f.  Gesetzgebung  u.  Verwaltung,   1899,  pp.  271-314)  the  following  condi- 
tions prevailed  in  the  German  Bmpire  at  the  end  of  the  nineties:  About 
one-half  of  the  total  national  income,  or  12,750,000,000  marks,  belonged  to 
that  part  of  the  earning  population  (i8>£  millions)  possessing  incomes  below 
900  marks;  a  little  more  than  one-fourth  of  the  total  national  income,  or 
6,500,000,000  marks,  belonged   to   that  part  of  the  earning  population 
(3^3    millions)    possessing  incomes   from   900   to   3,000   marks;  and   not 
quite  a  quarter  of  the  total  national  income,   or  5,750,000,000  marks, 
belonged  to  that  part  of  the  earning  population  (one-third  million)  pos- 
sessing incomes  exceeding  3,000  marks. 

38.  Grundriss,  II,  pp.  460-461. 

39.  Volume  III  of  the  Appendix  to  the  German  finance  reform  bills  of 
1908:  Materialien  zur  Beurteilung  der  Wohlstandsentwicklung  Deutsch- 
lands  im  letzten  Menschenalter  (No.  1043  of  the  Parliamentary  publica- 
tions of  1908),  pp.   14-15;  according  to  the  Reichsanzeiger  of  February 
n,    1909,    the    assessed    taxable    income    of    this    group    amounted    to 
5,450,975,235  marks. 

40.  Ibid. 

41.  Walter  Troeltsch,  Uber  die  neuesten  Veranderungen  im  deutschen 
Wirtschaftsleben,  p.    144.     At  the  same  time  it  remains  true  that,   as 
already  mentioned  (footnote  33)  in  Prussia  in  1908  there  were  still  about 
18,000,000  souls,  or  47.22  per  cent  of  the  population  of  about  38,000,000, 
exempt  from  taxation,  and  that  of  the  balance,  16,000,000,  or  42.54  per 
cent,  were  assessed  in  the  lowest  income  tax  group  (with  incomes  exceeding 
900  marks  and  below  3,000  marks). 

42.  With  the  (rather  unimportant)  reservations  made  on  p,  17  of  the 
Materialien    zur    Beurteilung    der    Wohlstandsentwicklung    Deutschlands 
im  letzten  Menschenalter,  already  cited  several  times. 

43.  Allowance  has  to  be  made,  of  course,  for  the  fact  that  one  person 
may  have  several  savings  bank  books. 

44.  For  the  period  between    1891-1897   see  Walter  Troeltsch,    Ueber 
die   neuesten    Veranderungen    im    Deutschen    Wirtschaftsleben,    p.    197; 
for  1904  and   1906,  Statistisches  Jahrbuch  f.  d.  Preuss.  Staat  fiir  1908 
(Berlin,  1909),  p.  144;  for  1907  the  "Materialien"  quoted  in  note  42. 


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T h  e     German     Great    Banks 


45.  In  1908  there  were  169  credit  banks  with  a  capital  of  at  least  1,000,000 
marks  each. 

46.  See  p.  21  of  the  "Materialien,"  quoted  in  note  42. 

47.  That  is,  from  1880  till  the  end  of  1905. 

48.  Statist.  Jahrbuch.  f.  d.  Deutsche  Reich  (twenty-ninth  year,  1908), 
pp.  46-47,  and  H.  v.  Scheel,  Die  Deutsche  Volkswirtschaft  am  Schlusse 
des  19.     Jahrhunderts  (Berlin,  1900,  Puttkammer  &  Miihlbrecht),  p.  91. 

49.  Materialien  zur  Beurteilung  der  Wohlstandsentwicklung  Deutsch- 
lands,  pp.  46-47.     According  to  Von  Halle  (loc.  cit.,  pp.  48-49)  the  total 
amount  of  power  developed  by  engines  in  all  the  works  in  Germany  in 

1895  was  only  about  3,500,000  horsepower. 

50.  For  1843  see  above,  p.  33,  for  1895  and  1907  see  the  Statist.  Korre- 
spondenz  of  February  3,  1909  (Year  XXXV),  p.  2. 

51.  For  the  census  of  occupations  of  1895  see  Paul  Voigt,  Deutschland 
u.  der  Weltmarkt,  Preussische  Jahrbucher,  vol.  91   (January  and  April, 
1898),  p.  271. 

52.  Geh.    Ober.-Reg.-Rat    Dr.    Traugott    Miiller,    Industriestaat    oder 
Agrarstaat?     Ein  Beitrag  zur  wirtschaftlichen  Wertschatzung  der  deut- 
schen  Landwirtschaft   (in  Mentzel  and  von  Lengerke's  Landwirtschaft- 
licher  Hulfs-  und  Schreibkalender,  55th  year,  1902,  Part  II,  pp.  55-85). 

53.  See  Statistisches  Jahrbuch  f.  d.  Deutsche  Reich  (29th  year),  1908, 
P-  27:  5»558>3I7  agricultural  establishments  in  1895  (last  census  published), 
as  compared  to  5,276,344  in  1882. 

54.  Ibid.,  43,243,742  hectares  (i  ha  =  about  2%  acres)  in  1895  as  com- 
pared to  40,178,681  in  1882. 

55.  Ibid.,  p.  39,  tab.  IV:  Live  stock  in  the  Federal  States  according 
to  the  census  of  1907.     The  figures  show  that  the  number  of  sheep  de- 
creased from  24,999,406  at  the  beginning  of  1873,  to  9,692,501  at  the  end 
of  1900,  and  7,681,072  at  the  end  of  1907,  whereas  the  number  of  horses 
increased  from  3,352,231  at  the  beginning  of  1873  to  4,195,361  at  the  end 
of  1900,  and  to  4,337,263  at  the  end  of  1907;  cattle  increased  from  15,776,702 
to  18,939,692  at  the  end  of  1900,  and  20,589,856  at  the  end  of  1907;  pigs 
from  7, 124,088  to  16,807,014  at  the  end  of  1900,  and  to  22,080,008  at  the 
end  of  1907,  or  more  than  threefold. 

56.  While  the  average  prices  of  wheat  rose  about  60  per  cent,  of  rye 
about  69  per  cent,  and  of  barley  about  90  per  cent  in  the  old  provinces  of 
Prussia  in  the  periods  1831-1840  to  1871-1880,  they  fell  again  (see  Troeltsch, 
loc.  cit.,  pp.  32  and  36)  despite  high  corn  duties,  which  were  introduced  in 
1879,  raised  in  1887,  but  reduced  again  by  the  commercial  treaties  of  1892 
and  1894.     Compared  to  the  prices  of  1876-1880  the  prices  of  wheat  in 
Prussia  fell  during  1881-1885  10  per  cent,  1886-1890  20  per  cent,  1896  36 
percent;  the  prices  of  rye,  1881-1885  4  per  cent,  1886-1890  15  per  cent, 

1896  29  per  cent;   the  prices  of  barley,  1881-1885  7  per  cent,   1886-1890 
17  per  cent,  1896  21  per  cent 

57.  According  to  Troeltsch  (loc.   cit.,  p.  44),  in  the  agricultural  com- 
munes of  Prussia  there  was  an  increase  of  registered  mortgages  amounting 


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to  190,000,000  marks  per  annum,  or  a  total  increase  of  2,100,000,000 
marks,  between  1896  and  1907.  The  indebtedness  of  the  farmers  of  126 
Wurttemberg  rural  communities  increased  40  per  cent  between  1874  and 
1894.  In  this  connection  Troeltsch  establishes  the  fact,  frequently  cor- 
roborated elsewhere,  that  80-90  per  cent  of  the  mortgage  debts  were 
due  to  the  fact  that  persons  acquiring  an  estate  (by  purchase  or  inherit- 
ance) were  compelled,  either  by  insufficiency  of  capital  or  by  excessive 
demands  of  co-heirs  to  incur  excessive  obligations.  This  evil  was  aug- 
mented by  overestimation  of  land  values,  due  to  an  unhealthy  develop- 
ment in  the  prices  of  land. 

58.  Much  can  and  must  yet  be  done  to  increase  agricultural  production; 
on  the  one  hand,  by  the  agricultural  exploitation  of  the  heaths  that  still 
exist  in  considerable  size,  especially  in  the  northwest  of  Germany;  and 
on  the  other  hand,  by  the  drainage  and  cultivation  of  the  moors  that 
cover  some  500  German  square  miles,  400  of  which  could  be  reclaimed 
for  purposes  of  agricultural  cultivation.     This  work,  however,   can  not 
be  carried  out  without  a  considerable  extension  of  the  present  railways 
and  canals.     Unfortunately,  however,  the  building  of  the  latter  is  often 
opposed  by  agriculturists  themselves.     (See  Max  Schinkel  in  the  steno- 
graphic reports  of  the  Bank  Inquiry  Commission,  points  III-V  of  the 
question  sheet,  p.  77.) 

59.  This,  of  course,  ought  not  to  be  carried  too  far,  as  it  may  lead  to 
endless  sophistries  in  favour  of  agriculture,  such  as  are  presented  by  some 
authors  (see  Traugott  Miiller,  loc.  cit.,  p.  61),  who  include  even  railway, 
postal,  and  telegraph  enterprises  under  agricultural  undertakings,  the  em- 
ployees consequently  being  classified  under  the  heading  of  "  those  engaged 
in  agriculture  as  a  secondary  occupation." 

60.  In  direct  contrast  to  trade,  industry,  etc.,  in  which  the  number  of 
independent  persons  decreased  12.6  per  1,000  during  the  same  period,  and 
the  number  of  persons  in  a  dependent  position  increased  30.5  per  1,000. 

61.  See  Ludwig  Poble,  loc.  cit.,  p.  22;  also  his  Deutschland  am  Scheide- 
wege  (Leipzig,  B.  G.  Teubner,  1902),  p.  43  seq. 

62.  The  statement  frequently  made,  that  agriculture,  and  agriculture 
only,  creates  new  values,  is  incorrect.     "Values"   that  are  completely 
new  can  not  be  produced  by  agriculture  either,  since  at  any  rate  such  seed 
as  is  not  produced  by  national  agriculture  forms  the  basis  of  that  activity 
to  the  same  degree  that  raw  materials  form  the  basis  of  industrial  activity. 
Thus  in  agricultural  as  well  as  in  industrial  activity  (different  as  they  may 
be  in  detail),  the  process  is  always  one  of  transformation  or  refinement, 
which  in  both  cases  merely  increases  the  value  of  preexisting  material. 
If,  therefore,  agriculture  and  industry  are  included  in  the  "productive 
occupations,"  trade  should  be  included  therein  by  the  same  right,  since 
its  value-increasing  activity  consists  in  the  transfer  of  goods  from  dis- 
tricts where  the  supply  is  great  to  districts  where  the  demand  is  great, 
independent  of  whether  the  goods  meanwhile  undergo  additional  manu- 
facture or  not.     (See,   among  other  authors:  Richard   Ehrenberg,    Der 


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The     German     Great    Banks 


Handel,  seine  wirtschaftliche  Bedeutung,  seine  nationalen  Pflichten  und 
sein  Verhaltnis  zum  Staate,  Jena,  Gustav  Fischer,  1887.) 

63.  Ludw.  Pohle,  loc.  cit.,  p.  23.     Max  Sering,  Handels-  und  Machtpo- 
litik,  Stuttgart,   1900  (J.  G.  Cotta  Nachflg.,  vol.  II,  p.  5),  does  not  go 
nearly  so  far,  when  he  points  out  that  "as  early  as  the  beginning  of  the 
fifties,  Germany  imported  more  rye,  and  since  the  middle  of  the  seventies 
more  wheat,  than  she  supplied  to  foreign  countries."     In  1860  the  excess 
of  rye  imports  amounted  to  some  259,000  tons. 

64.  Werner  Sombart,  Deutsche  Volkswirtschaft,  2nd  ed.,  p.  411. 

65.  Huber  is  right  when  he  says  (loc.  cit.,  p.  109),  regarding  the  German 
textile  industry,   that  the  whole  export  trade  depends  on  the  oversea 
supply  of  wool  and  cotton. 

66.  See    Werner    Sombart,    Die    Deutsche    Volkswirtschaft,    2nd    ed., 
p.  447:  "The  piece  de  resistance  of  the  German  exports  consists  to-day  of 
high-class  manufactured  goods,  containing  great  labor  value  (Arbeitswert) 
and  little  land  value  (Bodenwert).     Germany,  consequently,  pays  in  an 
increasing  measure  for  foreign  soil  with  home  labour." 

67.  Statist.  Jahrb.  f.  d.  Deutsche  Reich  of  1909,  Appendix,  page  153.    The 
special  trade  exports  comprise,  since  March  i,  1906,  the  exports  from  the 
customs  area  (Wirtschaftsgebiet),  including  domestic  produce  (exported 
under  the  supervision  of  the  customs  authorities  and  subject  to  excise  or 
stamp  duties),  such  as  beer,  spirits,  salt,  sparkling  wines,    playing-cards 
tobacco,  and  sugar;  as  well  as  the  exports  from  the  customs  area,  after 
further  manufacture  for  home  account.     The  customs  area  in  the  sense  of 
these  new  statistics  comprises  the  German  Empire  (without  Heligoland 
and  some  communes  in  Baden),  the  Grand  Duchy  of  Luxemburg,  and  the 
Austrian  communes  of  Jungholz  and  Mittelberg. 

The  imports  for  home  consumption  comprise,  on  the  one  hand,  the 
imports  into  the  free  commerce  of  this  customs  area,  directly  or  with 
cockets,  including  imports  from  free  districts,  bonded  warehouses,  etc.,  as 
well  as  the  imports  of  goods  for  shipbuilding,  etc.,  and  the  supplies 
of  foreign  goods  for  German  ships  outward  bound;  on  the  other  hand, 
merchandise  imported  into  the  customs  area  for  the  purpose  of  being 
further  manufactured  for  home  account  (ibid.,  p.  124). 

68.  If  it  were  possible  to  compare  the  figures  given  by  Rau  with  the 
present-day  official  import  and  export  statistics  (which  in  the  absence  of 
agreement  of  geographic  areas,  of  bases  and  methods  of  calculation  is 
impossible)  it  would  appear  that  German  export  trade,  as  well  as  German 
import  trade,  had  increased  between  1842  and  1907  thirteenfold,  while  the 
population  of  Germany  has  not  even  doubled  during  the  same  period. 

69.  See  Appendix,  Volume  III,  to  the  Imperial  finance  reform  bill  of 
1908:  Materialien   zur   Beurteilung  der  Wohlstandsentwicklung  Deutsch- 
lands  im  letzten  Menschenalter  (p.  52). 

70.  Only  in  the  case  of  food  and  cattle  was  there  a  decrease  in  exports, 
namely,  by  20.2  per  cent,  while  the  imports  increased   131.7  per  cent 
(ibid.). 


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National    Monetary     Commission 

71.  For  details,  see  page  43  of  the  Appendix,  Volume  III,  to  the  Impe- 
rial finance  reform  bill  of  1908. 

72.  Ibid.,  pages  37-38  and  53. 

73.  A  permanent  adverse  balance  of  payment  is  altogether  impossible — 
that  is  to  say,  it  would  mean  bankruptcy. 

74.  In  that  case,  and  in  that  case  only,  will  Ludwig  Pohle's  fears  prove 
unfounded  (loc.  cit.,  p.  26),  that  "the  increase  in  the  absorptive  capacity 
of  the  home  market  denotes  a  constant  growth  of  Germany's  dependence 
on  foreign  countries,  instead  of  an  increase  in  her  economic  independence. 

75.  Engel,  in  Zeitschrift  des  Statist.  Bureaus,  Berlin,  1875,  vol.  4,  p.  356. 

76.  W.  Sombart,  Der  moderne  Kapitalismus,  II,  p.  16. 

77.  Engel,  loc.  cit.,  p.  457  et  seq. 

78.  Deutscher  Oekonomist,  1885,  2istFeb.,  p.  72. 

79.  Van  der  Borght's  essay:  "  Aktiengesellschaften"  in  the  Handwor- 
terbuch  der  Staatswissenschaften  (Jena,  1899,  Gust.  Fischer),  Vol.  I,  pp. 
192-193. 

80.  With  reference  to  the  distribution  by  the  different  branches,  see  par- 
ticularly  Ed.    Wagon,    "Die   finanzielle   Entwicklung  deutscher   Aktien- 
gesellschaften von  1870—1900"  (Jena,  1903,  Gust.  Fischer),  especially  pp. 
41  et  seq.,  56  et  seq.,  62  et  seq.,  73  et  seq.,  107  set  seq. 

8 1.  As  late  as  1883  there  were  only  104  machine  building  companies, 
with  193,240,000  marks  capital. 

82.  From  1870-1874,  fifty-nine  brewery  companies,  with  a  capital  of 
72,000,000  marks,  were  founded  (Ed.  Wagon,  loc.  cit.,  p.  107). 

83.  Deutscher  Oekonomist,  1901,  26th  January,  p.  45. 

84.  See  v.  Halle,  loc.  cit.,  p.  94. 

85.  See  Deutscher  Oekonomist  for  7th  Jan.,  1905;  6th  Jan.,  1906;  and 
1 8th  Jan.,  1908. 

86.  According  to  information  collected  by  the  Imperial  Statistical  Office 
the  figures  were  217  companies,  with  a  capital  of  260,700,000  marks. 

87.  These  figures  are  based  on  material  collected  by  the  Imperial  Sta- 
tistical Office. 

88.  Ed.  Wagon,  loc.  cit.,  pp.  166-167.     (The  rate  of  dividend,  however, 
is  reduced  in  case  the  stock  was  bought  above  par.) 

89.  For  the  interpretation  of  "net  income,"  see  Ed.  Wagon,  loc.  cit., 
p.  12;  Dividend  income,  minus  the  losses  given  in  the  balance  sheets,  or 
those  arising  from  liquidations  and  failures. 

90.  From  1872-1900,  exclusive  of  machine  factories  and  railway-supply 
factories. 

91.  See  L.  Glier,  Zur  neuesten  Entwickelung  der  amerikanischen  Eisen- 
industrie,  in  Schmoller's  Jahrbuch  fur  Gesetzgebung,  etc.,  27th  year,  No. 
3,  p.  229-230. 

92.  Statist.  Jahrb.  f.  d.  deutsche  Reich,  29th   year,   1908.     Appendix, 
p.  30*,  table  19.     In  1908  the  German  output  of  pig  iron  amounted  to 
only  11,805,000  tons  (ibid.,  3oth  year,  1909,  Appendix,  p.  28*,  tab.  20). 


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93.  L.  Glier,  Zur  gegenwartigen  Lage  der  amerikanischen  Eisenindus- 
trie,  in  Conrad's  Jahrbiicher,  3d  series,  vol.  31,  p.  591  (Feb.,  1908). 

94.  Henry  Voelcker,  Eisen  u.  Stahl,  in  the   magazine  "Die  Weltwirt- 
schaft,"  ed.  by  v.  Halle,  Year  III,  1908,  Part  II,  p.  78.     According  to  the 
Imperial  statistics  the  consumption  amounted  in  1904  to  166.1  kilograms, 
and  in  1906  to  197.8  kilograms  per  capita.     These  statistics,  in  calculat- 
ing the  consumption,  subtract  the  exports  of  pig  iron,  but  not  the  exports 
of  iron  manufactures,  and  thus  arrive  at  a  larger  consumption  figure  per 
capita. 

95.  See  Ludwig  Pohle,  Die  Entwickelung  des  deutschen  Wirtschaftslebens 
im  letzten  Jahrhundert,  Appendix  p.  145;  Statist.  Jahrb.  f.  d.  Deutsche 
Reich,  29th  year,   1908,  Appendix,  p.  29*,  tab.  18  (for  the  period  1887- 
1907);  for  value  see  E.  Jiingst,  "Bergbau,"  in  the  magazine  "Die  Welt- 
wirtschaft,"  ed.  v.  Halle,  Year  III,  1908,  Part  II,  p.  61.     The  German 
coal  production  in   1908  amounted  to   148,537,000  tons  (Statist.  Jahrb. 
f.  d.  Deutsche  Reich,  3oth  year,  1909;  Appendix,  p.  27*,  tab.  19). 

96.  E.  Jiingst,  loc.  cit.,  p.  60,  and  Statist.  Jahrb.  f.  d.  Deutsche  Reich, 
30th  year,  1909,  p.  97. 

97.  Rud.  Eberstadt,  Der  Deutsche  Kapitalmarkt,  Leipzig,  1901,  p.  64. 

98.  Thus  in  1894  the  Gesellschaft  fur  elektr.  Unternehmungen  Berlin 
(affiliated   with   the   Union-Elektr.-Ges.,   Loewe-Group) ;   1895,   die   Akt.- 
Ges.  fur  elektr.   Anlagen  u.   Bahnen,   Dresden   (Kummer);  Kontinentale 
Gesellschaft  fur  elektr.   Unternehmungen   (Schuckert);  Bank  fur  elektr. 
Unternehmungen,  Zurich  (Allgem.  Elektr. -Ges.) ;  1896,  Deutsche  Ges.  f. 
elektr.  Unternehmungen,  Frankfurt  a.  M.  (Lahmeyer);  Schweizerische  Ges. 
fur  elektr.   Industrie   (Siemens  &  Halske);  1897,   Elektrische  Licht-und 
Kraftanlagen  A.-G.  (Siemens  &  Halske),  Aktiengesellschaft  fur  Elektrizi- 
tatsanlagen  (Helios);   1898,  Elektra,  Dresden  (Schuckert). 

99.  On  this  and  the  preceding  subjects,  see  Friedr.  Fasolt,  Die  sieben 
grossten    deutschen    Elektrizitatsgesellschaften,    ihre    Entwicklung    und 
Unternehmertatigkeit  Dresden,    1904;  also  Jos.   Loewe,   Die  elektrotech- 
nische  Industrie  in:  Storungen  im  deutschen  Wirtschaftsleben,  Vol.  Ill, 
pp.  77-155  (publications  of  the  Verein  fur  Sozialpolitik,  Vol.  CVII),  1903; 
Ed.  Wagon,  loc.  cit.,  p.  73  et  seq.;  Max  Jorgens,  Finanzielle  Trustgesell- 
schaften  (Stuttgart,  1902,  J.  G.  Cotta  Nachf.),  p.  116  et  seq.;  H.  Hasse, 
Die  A.  E.  G.  (Heidelberg,  Winter,  1903). 

100.  1896,   "Siemens"  Elektrische  Betriebe  G.  m.  b.  H.   (Siemens  & 
Halske);    1897,    Elektrizitatslieferungsgesellschaft    (Allgem.  Elektrizitats- 
gesellschaft) ;   1898,    Bayerische   Elektrizitatswerke   A.-G.    (Helios);  Sud- 
deutsche    Elektrizitatswerke    (Kummer);  A.-G.    Siiddeutsche   elektrische 
Lokalbahnen  (Kummer);   1900,  Elektrizitats-Werke-Betriebs-Aktiengesell- 
schaft  (Kummer).     All  these  companies  (1896-1900)  were  organized  in 
boom   time,   when  the  general  public  took  considerable  interest  in  the 
shares  of  such  establishments. 

10 1.  These  figures  (taken  from  E.  Budde,  Elektrotechnik,  in  the  serial 
Die  Weltwirtschaft,  ed.  v.  Halle,  year  III,  Part  II,  1908,  p.  88).     The  details 


8n 


National    Monetary     Commission 

here  given  from  the  Monatliche  Nachrichten  iiber  den  auswartigen  Handel 
Deutschlands  would  seem  to  require  considerable  revision  according  to  the 
Statist.  Jahrbuch  f.  d.  Deutsche  Reich,  2gth  year,  1908,  pp.  157-158  (thus, 
for  instance,  the  value  of  the  incandescent  lamps  exported  during  1907 
amounted  to  10,478,000  marks  and  not  to  8,382,000  marks,  etc.). 

102.  See  Ed.  Wagon,  loc.  cit.,  p.  62;  Geh.  Ober-Reg.-Rat  Gust.  Muller, 
Die  chemische  Industrie,  Leipzig,  1909,  B.  G.  Teubner.     As  far  as  the  fol- 
lowing statements  have  been  taken  from  the  reports  on  the  administration 
of  the  chemical  trade  association  we  must  not  forget  that  this  association, 
which  was  established  on  the  basis  of  the  accident  insurance  act  of  the  6th 
of  July,  1884,  requiring  the  employer  to  insure  his  workmen  against  acci- 
dents happening  to  them  while  in  his  employ,  includes  many  minor  trades 
which  are  not,  strictly  speaking,  chemical.     These  are  the  illuminant,  fat, 
soap,  and  oil  trades;  also  the  salt  works,  so  far  as  they  do  not  belong  to 
miners'  associations  (Knappschaftsverbande)  established  under  the  laws 
of  the  several  States.     In  addition  to  these  are  the  roof  felt  and  roofing- 
paper  factories,  manufacturers  of  rubber  and  gutta-percha  goods,  the  pre- 
serving works,  with  the  exception  of  those  chiefly  occupied  in  preserving 
wood;  finally,  the  artificial  mineral -water  trade.     (See  Gustav  Muller,  loc. 
cit.,  p.  27.) 

103.  Statist.  Jahrb.  f.  d.  Deutsche  Reich,  29th  year,  1908,  p.  47. 

104.  See  Richard  Brauer,  Chemische  Industrie,  in  the  annual  Die  Welt- 
wirtschaft,  ed.  v.  Halle,  Year  III,  1908,  Part  II,  p.  91. 

105.  The  totals  given  by  Richard  Brauer,  loc.  cit.,  p.  91,  are  incorrect 
as  they  are  stated  in  metric  tons  of   1,000  kilograms  instead  of  metric 
quintals  of  100  kilograms.     Moreover,  his  import  and  export  figures  seem 
to  include  articles  which  are  either  used  not  exclusively  or  not  at  all  in  the 
German  chemical  industry. 

106.  Ibid.,  p.  91. 

107.  See  Rich.  Brauer,  loc.  cit.,  p.  92. 

108.  Statist.  Jahrb.  f.  d.  Deutsche  Reich,  29th  year,  1908,  p.  47. 

109.  Ludwig  Pohle,  Die  Entwicklung  des  deutschen  Wirtschaftslebens 
im  letzten  Jahrhundert,  p.  70  seq.,  especially  pp.  72-73. 

no.  Loc.  cit.,  p.  77. 

in.  Statist.  Jahrb.  f.  d.  Deutsche  Reich,  29th  year,  1908,  pp.  46  and  47. 

112.  This  includes  State  railways,  railways  administered  on  account  of 
the  State,  and  purely  private  railways. 

113.  Statist.  Jahrb.  fur  das  Deutsche  Reich,  29th  year,  1908,  p.  113. 

114.  Statist.  Jahrb.  fur  das  Deutsche  Reich,  1906,  p.  66.     At  the  end  of 
1903   this  network  comprised   52,814.2    kilometres    (ibid.,    1905,   p.    62); 
949,290,000  travellers  and  390,741,000  tons  of  goods  were  conveyed  on 
the  standard  gauge  main  and  branch  lines  during  1903  (ibid.,  1905,  p.  64, 
tab.  2d). 

115.  Statist.  Jahrb.  f.  d.  Deutsche  Reich,  3Oth  year,  1909,  p.  115,  tab.  2d. 

116.  W.  Sombart,  Deutsche  Volkswirtschaft,  2nd  ed.,  p.  267. 

117.  Statist.  Jahrb.  f.  d.  Deutsche  Reich,  3oth  year,  p.  118. 


812 


The     German     Great     Banks 


1 1 8.  Ibid.,  p.  117,  tab.  3. 

119.  Ibid.,  p.  112,  tab.  ib. 

1 20.  Ibid.,  p.  112,  tab.  ib,  and  p.  in,  tab.  ia. 

121.  Ibid.,  p.  in. 

122.  According  to  the  memorial  presented  to  the  Reichstag  on  the  occa- 
sion of  the  naval  bill  of   1899,  entitled  "Die  Steigerung  der  deutschen 
Seeinteressen  von  1896  bis  1898,"  which  contains  the  above  estimate,  the 
total  value  of  the  German  merchant  marine  had  increased  from  1896  to 
the  end  of  1899  by  66%  per  cent.     The  sum  required  to  replace  the  German 
merchant  marine  in  case  of  its  loss  might  therefore  be  estimated  in  1 899  at 
least  at  750,000,000  marks  (p.  147).     A  further  increase  of  14  per  cent  of 
steamships  took  place  during  the  next  year,  sailing  vessels  decreasing   by 
3  per  cent.     The  value  of  the  German  mercantile  fleet  at  the  end  of  1900 
might  therefore  be  estimated  at  640,000,000  to  650,000,000  marks.     Accord- 
ing  to  the   memorial  of  the   Imperial  Admiralty  quoted   above,    dated 
December,  1905,  the  value  of  the  German  merchant  marine  at  the  end  of 
1905  amounted  to  810,000,000  marks,  as  stated  in  the  text,  while  the  cost 
of  replacing  it  would  considerably  exceed  1,000,000,000  marks.     Accord- 
ing to  the  Handbuch  der  deutschen  Aktiengesellschaften,  ed.  1904  to  1905, 
I  and  II,  the  following  number  of  German  joint-stock  shipping  companies 
existed  at  the  end  of  1903:  One  hundred  and  five  joint-stock  companies 
with  a  share  capital  of  415,019,000  marks,   and  outstanding  bonds  of 
127,824,000  marks.     The  amount  of  share  and  loan  capital  of  the  joint- 
stock  companies  in   Hamburg  and   Bremen  alone  amounted,   according 
to   the   memorial  of   the   admiralty  (December,   1905)  quoted   above,  to 
443,000,000  marks,  against  273,000,000  marks  at  the  end  of  1899. 

123.  Statist.  Jahrb.  f.  d.  Deutsche  Reich,  1908,  p.  108. 

124.  See  Emil  Fitger,  Ein  Jahrzehnt  in  Schiffsbau,  Reederei  und  See- 
schiffahrt,  Berlin,  Leonh.  Simion  Nachfolger,  p.  22. 

125.  See    the   memorial    of   the   admiralty,    December,    1905,    already 
quoted,  p.   94;  Ernst  von  Halle,   Die  Entwicklung  und  Bedeutung  der 
deutschen  Reederei   (Handels-  und  Machtpolitik,   Vol.   II,   pp.    129-174, 
Stuttgart,  J.  G.  Cotta's  Nachf.,  1900);  and  Reederei  u.  Schiffahrt,  in  the 
annual  Die  Weltwirtschaft,  ed.  von  Halle,  year  III,  1908,  part  I,  Internat. 
Uebersichten,  p.  83  seq. 

126.  See  Emil  Fitger,  loc.  cit.,  pp.  49,  55,  and  56-61. 

127.  Statist.  Jahrb.  fur  d.   Deutsche  Reich,  Joth  year,    1909,  p.    140, 
tab.  13. 

'128.  See  Emil  Fitger,  .oc.  cit.  pp.  61,  64-68. 

129.  See   B.    Huldermann,    Subventionen   der   auslandischen   Handels- 
flotten  (Berlin,  1900,  Ernst  Siegfr.  Mittler  &  Sohn),  p.  39. 

130.  It  raised  its  capital  in  1853,  1865,  1867,  1868,  1870,  1871,  1872,  1874, 
1875  (in  1877  the  capital  was  reduced),  1887,  1888,  1897,  1898,  1899,  1900, 
and  1905. 

131.  Regarding  the  development  of  other  large  German  shipping  com- 
panies see  W.  Sombart,  Die  deutsche  Volkswirtschaft,  2nd  ed.,  Appendix 


National    Monetary     Commission 


26,  p.  544.  Among  the  other  German  shipping  companies  are  the  following : 
Deutsche  Dampfschiffahrtsgesellschaft  Kosmos;  Deutsche  Levante-Linie ; 
Deutsch-Ostaf rika-Linie ;  Hamburg-Sudamerikanische  Dampf ergesellschaf t ; 
Deutsch-Australische  Dampf  ergesellschaf  t ;  Woermann  Linie;  Hamburg- 
Bremer  Af rika-Linie ;  Dampfschiffsgesellschaft  Argo;  Dampfschiffsgesell- 
schaft  Hansa;  Dampfschiffahrtsgesellschaft  Neptun;  Dampf schiffsreederei 
Union. 

132.  The  following  is  taken  from  Karl  Thiess,  Organisation  und  Ver- 
bandsbildung  in  der  Handelsschiffahrt  (Berlin,  1903,  Ernst  Siegf.  Mittler 
&  Sohn). 

133.  The  following  details  are  taken  in  the  main  from  Emil  Fitger,  loc. 
cit.,  p.  26. 

134.  W.  Sombart,  Die  deutsche  Volkswirtschaft,  2nd  ed.,  p.  284,  and 
Appendix  25  (Organisation  of  inland  navigation  in  the  main  centres);  p. 

543- 

135.  Statist.  Jahrb.  f.  d.  Deutsche  Reich,  3Oth  year,  1909,  p.  129. 

136.  Of  the  total  length,  2,437.77  kilometres  were  navigable  by  vessels 
of  1.75  meter  draft;  3.082.12  kilometres  by  vessels  of  1.50  meter  draft, 
7,064.07  kilometres  by  vessels  of  i  meter  draft;  599.40  kilometers  by  vessels 
of  0.75  meter  draft;   1,182.83  kilometers  by  vessels  of  less  than  0.75  mete? 
draft.     See  Statist.  Jahrb.  f.  d.  Deutsche  Reich,  1904,  p.  74.     See  ibid., 
1905,  p.  71,  for  corrections  as  to  vessels.     These  corrections  have  been 
introduced  in  the  text.     Statist.  Jahrb.  f.  d.  Deutsche  Reich,  1906,  p.  75 
gives  the  same  figures,  while  in  the  volume  for  1908,  p.  100,  the  total  length 
of  the  navigable  waters  is  given  for  the  3ist  of  December,  1902,  as  13,793.4 
kilometers. 

137.  v.  Halle,  loc.  cit.,  p.  78.     On  pages  128-129  of  the  same  work  are 
found  details  on  the  status  of  the  imperial  navy  in  1900. 

138.  See  the  Jubilee  memorial  published  by  the  directorate  of  the  Reichs 
bank:  "Die  Reichsbank  1876-1900,"  Gustav  Fischer,  Jena  (cited  below 
as  the  jubilee  memorial  of  the  Reichsbank),  as  well  as  the  statistical  tables 
submitted  to  the  Bank  Inquiry  Commission  of  1908,  and  the  Statist.  Jahrb.- 
f.  d.  Deutsche  Reich,  29th  year,   1908,  pp.  229-234,  and  Internationale 
Uebersichten,  pp.  70-75*;  Karl  von  Lumm,  Die  Stellung  der  Notenbanken 
in  der  heutigen  Volkswirtschaft  (Berlin,  1909,  J.  Guttentag);  Louis  Katzen- 
stein,  Die  dreissigjahrige  Geschaftstatigkeit  der  Reichsbank,  Berlin,  Leon- 
hard  Simion  Nachf.,    1906.     Regarding  the  questions  submitted  to  the 
Bank  Inquiry  Commission  of  1908,  see  principally:  Die  Verhandlungen  der 
Bank-Enquete-Kommission,  items  I-V  of  the  question  sheet,  Berlin,  1909* 
For  the  rest,  Friedr.  Koch,  Der  Londoner  Goldverkehr;  (Stuttgart  &  Berlin, 
1905);  E.  Schmalenbach,  Der  Reichsbank- Ausweis  (Zeitschr.  fiir  handels- 
wissenschaftliche  Forschung,  ed.  Schmalenbach,  year  I,  1906,   No.  3,  pp. 
77-92;  Heiligenstadt,  Der  deutsche  Geldmarkt  (in  Schmoller's  Jahrb.,  vol. 
31,  pp.  7 1  seq.) ;  Arthur  Feiler,  Die  Probleme  der  Bankenquete  (Jena,  Gustav 
Fischer,    1908),    Ferdinand  Bendixen,  Das    Wesen   des   Geldes    (Leipzig, 


814 


T h  e     German     Great    Banks 


Duncker  &  Humblot,  1900);  Magnus  Biermer,  Die  deutsche  Geldverfas- 
sung  (Giessen,  1908);  Hermann  Schumacher,  Die  deutsche  Geldverf as- 
sung  u.  ihre  Reform  (in  Schmoller's  Jahrb.,  Vol.  XXXII,  p.  i  seq;  R. 
Koch,  Der  Kredit  bei  der  Reichsbank  (Zeitschrift  f.  Handelswissenschaft 
und  Praxis,  year  I,  No.  4,  July,  1908,  pp.  115-118);  Heymann,  Reichsbank 
und  Geldverkehr  (Berlin,  1908);  A.  Arnold,  Die  Bedeutung  der  Giro- 
Guthaben  fur  die  Bankpolitik  (in  Bank-Archiv,  year  VI,  No.  5,  p.  155  seq.) ; 
Edgar  Jaff6,  Die  Ursachen  der  letzten  Geldteuerung  und  die  Bankenquete 
(Deutsche  Wirtschaftszeitung,  4th  year,  No.  13,  p.  582  seq.  and  No.  14,  p. 
626  seq.). 

139.  The  bank  notes,  according  to  article  3  of  the  bank  law,  were  issued 
up  to  1906  in  series  of  1,000  marks  and  100  marks,  whereas  under  the 
Imperial  law  of  February  20,  1906,  series  of  50  and  20  marks  were  allowed, 
the  amount  of  which,  however,  according  to  the  declaration  made  in  the 
Reichstag,  remains  at  present  limited  to  300,000,000  marks. 

140.  According  to  the  text  of  the  Supplementary  Bank  Law  of  the  ist 
July,    1909.     (Formerly  it  read:  "in  exchange  for  German  legal  tender 
money.") 

141.  The  19,416  private  giro  accounts  carried  on  March  31,  1908,  included 
6,366  accounts  belonging  to  commerce,   transport,  and  insurance;  7,763 
accounts  belonging  to  industries  and   trades;    369  accounts  belonging 
agriculture   and  allied  trades;  936   accounts  of   joint-stock  banks;  2,31 
accounts  of  bankers  and  financial  businesses  of  all  descriptions. 

142.  The  total  turnover  in  1908  amounted  to  269,946,259,800  marks. 

143.  Exclusive  of  the  other  clearing  houses  existing  in  113  towns,  the 
total  turnover  of  which  amounted  in  1907  to  249,258,000,000  marks. 

144.  That  is  the  turnover  in  receipts  and  expenditures  in   the  giro, 
transfer,  deposit,  bill,  and  collateral  loan  business,  in  discounted  and  col- 
lected securities,  and  in  other  business  of  every  description  transacted  with 
authorities  and  private  persons. 

145.  As  far  as  Germany  is  concerned  it  is  incorrect  to  speak  of  unsecured 
bank  notes,  for  bank  notes  without  any  security  whatever  do  not  exist 
there.     (Article  17  of  the  bank  law). 

146.  Cash  in  the  sense  of  article  9  of  the  bank  law  consists  of  metal 
(Metallvorrat,  see  note  147),  treasury  notes  of  the  Empire,  and  bank  notes 
of  the  four  note-issuing  banks. 

147.  "Metal  in  hand"  consists,  according  to  articles  9  and  17  of  the 
bank  law,  of  current  German  money,  gold  in  bars  or  in  foreign  coins,  the 
pound  fine  (German)  being  calculated  at  1,392  marks. 

148.  Concerning  these  reasons,  see  my  remarks  before  the  Bank  Inquiry 
Commission  of    1908,  on  points  I-V  of  the  question  sheet  (Berlin,  1909), 

P-  259- 

149.  As  a  rule  a  continued  outflow  of  gold  into  foreign  countries  can  only 
take  place  when  the  balance  of  payments  is  unfavorable  to  Germany  and 
the  quotations  on  foreign  bills  threaten  to  surpass  the  upper  gold  point  or 
have  surpassed  it,  so  that  the  export  of  gold  becomes  remunerative.     (Se 


National    Monetary     Commission 

my   statements  in   the   Proceedings   of   the   Bank   Inquiry  Commission, 
Berlin,  1909,  p.  71.) 

150.  See  my  statements  in  the  Proceedings  of  the  Bank  Inquiry  Com- 
mission, p.  70. 

151.  Highest  amount  (December  31,   1907),  364,297,700  marks;  lowest 
amount  (January  23,  1907),  54,090,000  marks.     The  figures  for  December 
31,  1907,  include  a  lombard  loan  of  67,630,200  marks  to  the  Preussische 
Zentral-Genossenschaftskasse. 

152.  The  quota  has  been  exceeded  in  1881-1885  nye  times  by  a  total 
of  92,795,000  marks;  1886-1890  ten  times  by  a  total  of  585,771,000  marks; 
1891-1895  four  times  by  a  total  of  253,598,000  marks;  1896-1900  seventy- 
one  times  by  a  total  of  8,184,274,000  marks;  1901-1905  thirty-two  times 
by  a  total  of  4,229,393,000  marks;   1906  seventeen  times  by  a  total  of 
3,547,485,000  marks;  and  1907  twenty-five  times  by  a  total  of  5,376,670,000 
marks.     During  1907  the  note  circulation  of  the  Reichsbank  exceeded  its 
quota  by  more  than  58,000,000  marks  on  an  annual  average;  on  December 
31,   1907   (a  very  abnormal  year),  the  excess  above  the  quota  of  notes 
exempt  from  taxation  attained  the  record  amount  of  625,974,363  marks. 

153.  The  literature  of  cartels  is  so  extensive  that  it  is  almost  impossible 
to  survey  it.     In  an  appendix  to  the  second  edition  (German)  of  this  book 
a  list  of  the  most  important  cartel  literature  from  1883-1905  was  given. 

154.  Menzel  (Report  at  the  general  meeting  of   the  Verein  fur  Sozial- 
politik,  1894,  p.  31  seq.,  and  "Die  Kartelle  und  die  Rechtsordnung,"  p. 
12  seq.)  shows  that  associations  for  the  limiting  of  competition,  and  for  the 
monopolizing  of  certain  branches  of  trade,  industry,  and  transportation 
existed  as  far  back  as  mediaeval  and  ancient  times.     He  refers  to  the  two 
constitutions,  473  A.  D.  and  483  A.  D.,  in  the  times  of  the  Roman  Empire 
(Cod.  lib.  4.  Tit.  59)  under  the  title  "On  monopolies,  and  illicit  agreements 
of  traders,  also  on  prohibited  and  unlicensed  agreements  of  tradesmen, 
employers,  and  bath-keepers."     The  constitution  of  Emperor  Zeno,  483 
A.  D.,  deals  with  monopolies  not  only  in  food  (especially  corn)  but  also  in 
articles  of  common  use  and  labor. 

In  the  legislation  of  the  ancient  German  Empire,  the  Imperial  decrees  of 
1512,  1524,  1530,  and  1532,  and  the  imperial  police  regulations  of  1548  and 
1577,  provide  severe  penalties  for  "Monopolia  und  schadlichen  Furkauf," 
(monopolies  and  harmful  sale).  "  However,  they  do  not  appear  to  have 
met  with  any  notable  degree  of  success."  (Report,  p.  34;  separate  edition, 
p.  14.) 

The  Gewerbeordnung  does  not  contain  any  clause  for  cartels  similar  to 
article  152  regarding  labor  contracts. 

155.  As  early  as  1862  the  cartel  of  Rhenish  tin-plate  factories,  as  well  as 
the  Cologne  tin-plate  combine,  were  in  existence.     To  them  was  added,  in 
1863,  the  German  rail  combine.     The  beginning  of  the  German  salt  works 
cartel  dates  from  1868,  the  potash  syndicate  from  1870  (Bucher  in  the 
Publications  of  the  Verein  fur  Sozialpolitik,  LXI,  pp.  141-142). 


816 


T h  e     German     Great     Banks 


156.  Consequently  (as  opposed  to  Sonibart,  Deutsche  Volkswirtschaft, 
2nd  ed.,  p.  344),  the  fact  that  many  cartels  were  formed  only  after  crises, 
and  to  some  extent  at  the  beginning  of  more  prosperous  times  is  only  a 
seeming  deviation  from  this  rule.     Brentano  (Proceedings  of  the  Verein  fur 
Sozialpolitik,  LXI,  p.  176)  calls  the  cartels  "a  product  of  necessity."     He 
says:  "The  necessity  of  cartels  is  rooted  to-day  in  the  constant  growth  of 
fixed,    untransferrable  capital  in  distinction   to   the   predominant  liquid 
capital  of  former  times."     He  does  not  fail  to  point  out,  however,  that  this, 
of  course,  refers  only  to  the  cartels  of  producers  and  not  to  the  cartels  of 
traders. 

157.  See  among  others  Stieda,  Schriften  des  Vereins  fur  Sozialpolitik, 
LXI,  p.  5;  Kleinwachter,  Die  Kartelle  (1883),  p.  126,  and  in  the  Hand- 
worterbuch  der  Staatswissenschaften,  2nd  ed.,  Jena,  1900,  vol.  V,  p.  39; 
Jos.  Grunzel,  Uber  Kartelle  (1902,  pp.  8  and  12). 

158.  See  especially  P.  F.  Aschrott,  Die  amerikanischen  Trusts  als  Wei- 
terbildung    der    Unternehmerverbande,    in    Braun's    Archiv    fur    soziale 
Gesetzgebung  und  Statistik  (1889),  vol.  II,  p.  383-418,  and  Jeremiah  W. 
Jenks,  Die  Trusts  in  den  Vereinigten  Staatenvon  Amerika  (Conrad's  Jahrb. 
f.  Nat.-Oek.  und  Stat.,  3rd.  series,  vol.  i,  p.  i  seq.,  1891). 

159.  Tariff  measures,  however,  in  so  far  as  they  are  intended  to  check 
an  abusive  business  policy  on  the  part  of  the  cartels — that  is,  by  reducing 
or  moderating  import  duties  on  cartel  products,  or  by  introducing  export 
duties  on  cartel  products — are  always  a  two-edged  sword,  since  they  react 
in  other  directions,  and  a  doubtful  as  well  as  questionable  weapon,  because 
they  strengthen  foreign  competition.     Some  of  these  objections  (although 
not  all)  apply  to  the  combating  of  an  incorrect  cartel  policy  by  means  of 
railway  tariffs,  i.e.,  through  facilitating  the  importation  of  competing  prod- 
ucts through  lower  freight  rates,  and  rendering  the  exportation  of  cartel-made 
articles  more  difficult  through  higher  freight  tariffs.     Other  restrictive  means 
in  the  economic  field  would  be  the  promoting  of  competitive  concerns,  the 
acquisition  of  such  undertakings  by  the  State,  or  the  endeavor  to  obtain 
as  decisive  an  influence  as  possible  on  the  price  policy  of  cartels  through 
state  participation  in  cartel  undertakings.     (This  experiment  was  to  have 
been  made  in  the  well-known  "  Hibernia"  case.)     A  further  means  would  be 
the  promotion  of  cartels  of  consumers.     A  "smaller  remedy"  for  relieving 
the  finishing  industry  ("  weiterverarbeitende  Industrie")  somewhat  from  the 
pressure  of  raw  material  cartels  by  means  of  duty-free  importation  of 
articles  destined  for  re-exportation  after  they  have  undergone  a  finishing 
process  exempt  from  customs  duty  ("zollfreier  Veredlungsverkehr")  is  of 
service  only  to  export  industries,  and  then  only  to  an  inconsiderable  extent. 

160.  See  von  Halle,  loc.  cit.,  p.  47. 

161.  Some  of  these  complaints  can  only  be  remedied  by  combinations  of 
consumers,  which  in  the  face  of  the  cartels  of  producers  are  becoming  more 
and  more  an  urgent  economic  necessity,  as  well  as  by  the  better  organization 
of  the  distributing  and  commission  agencies. 


90311°— ii 53  817 


National    Monetary     Commission 


162.  Reichstag  Publications,  nth  legislative  period,  II  session,  1905-6, 
No.  4. 

163.  Ibid.,  nth  legislative  period,  II  session,  1905-6,  No.  351. 

164.  Ibid.,  1 2th  legislative  period,  I  session,  1907,  No.  255. 

165.  Ibid.,  i2th  legislative  period,  I  session,  1907-1909,  No.  1019. 

1 66.  It  is  exceedingly  interesting  to  note  that  these  two  charges  have 
also  been  brought  against  the  United  States  Steel  Corporation  founded  in 
1901.     Glier  demonstrates  convincingly  in  his  treatise  "Zur  gegenwartigen 
Lage    der    amerikanischen    Eisenindustrie,"    written    in    February,    1908 
(Conrad's  Jahrb.,  Ill  series,  vol.  35,  p.  587  seq.),  that  the  corporation 
displayed  great  moderation  in  the  fixing  of  prices  of  manufactured  prod- 
ucts during  the  first  boom  (1901  to  1902-3),  although  the  prices  for  foundry 
raw  iron  which  the  corporation  neither  produced,  bought,  nor  sold,  rose  by 
about  34  per  cent  (pp.  599-601);  it  held,  however,  tenaciously  to  its  high 
prices  (a  proceeding  approved  of  by  Glier)  during  the  period  of  reaction 
(1903-4),  for  a  reduction  in  price  would  not  have  caused  a  greater  demand. 

167.  Although  the  United  States  Steel  Corporation  during  the  last  crisis 
refrained  in  the  main  from  selling  to  foreign  countries  and  endeavored  to 
bring  about  a  recovery  solely  through  enormous  limitations  of  output,  the 
chief  reason  for  such  procedure  was  that  foreign  markets  at  the  time  were 
not  capable  of  absorbing  goods  even  at  the  lowest  .prices.     Subsequent 
events  have  proved,  however,  that  this  policy  was  not  able  to  restore  a 
healthy  tone  to  the  American  market,  so  that  in  the  event  of  another  crisis 
a  different  policy  may  be  pursued  by  the  Americans. 

1 68.  See  the  remarks  of  Director  Mannstaedt  in  the  "Verbal  delibera- 
tions"  ("  kontradiktorische  Verhandlungen")  concerning  German  cartels, 
Part  6,  "Verhandlungen  liber  den  Halbzeugverband  am  2.  und  3.  Decem- 
ber 1903,"  p.  465.     I  consider  these  remarks  to  be  as  correct  as  they  are 
important. 

169.  That  the  so-called  "mixed"  ("gemischt")  works  suffered  less  than 
the  "pure"  ("reine")  works,  and  the  reasons  therefor,  are  well  known. 

170.  The  Rhenish- Westphalian  and  the  Siegerland  Pig  Iron  syndicates 
ceased  to  exist,  for  the  time  being  at  any  rate,  on  January  i,  1909,   certain 
difficulties  preventing  their  prolongation ;  on  the  other  hand,  a  plate-glass 
sale  combine  was  formed  among  a  number  of  Siegerland  works.      As  regards 
the  Upper  Silesian  Pig  Iron  Syndicate,  see  note  171.     The  manufacturers  of 
pig  iron  in  Rhineland  and  Westphalia  are  therefore  in  the  same  position 
they  were  before  the  nineties,  namely  in  a  state  of  free  competition.     Neither 
has  a  prolongation  of  the  Lorrain-Luxemburg  Pig  Iron  Syndicate  hitherto 
proved  feasible. 

171.  For  what  follows  see  Volcker,  L'Etat  actuel  de  1'industrie  side- 
rurgique  allemande  et  son  organisation  (Revue  Economique  Internationale, 
vol.  Ill,  No.  4,  December  15-20,   1904,  p.  727  seq.),  and  J.  Kollmann, 
Der  Stahlwerksyerband  (in  the  "Nation"  22d  year,  Nos.  18-22,  February 
4-25,    1905).     Meantime  hearings  ("kontradiktorische   Verhandlungen") 
have  taken  place  in  the  Imperial  Office  of  the  Interior  regarding  the  Stahl- 


818 


T h  e     German     Great    Banks 


werksverband-Akt.-Ges.  at  Diisseldorf,  and  the  Oberschlesischer  Stahl- 
werksverband  (Limited)  in  Berlin.  Most  of  the  Upper  Silesian  Works, 
quitting  the  last-mentioned  union  in  April,  1907,  entered  the  Diisseldorfer 
Stahlwerksverband,  and  subsequently  founded,  on  June  27,  1907,  the 
Oberschlesische  Stahlwerks-Gesellschaft  (Limited)  in  Berlin  for  the  com- 
mon sale  of  the  products  B  which  had  been  released  (freigegeben)  by  the 
Diisseldorfer  Stahlwerksverband. 

172.  Further,  the  shortening  of  the  time  of  payment  for  domestic  buyers 
to  fifteen  days  after  delivery  (foreign  buyers  have  to  pay  immediately  after 
presentation  of  bills  of  lading),  and  the  limitation  of  discount  for  domestic 
buyers  (no  discount  is  allowed  to  foreign  customers)  will  exercise  a  favor- 
able influence  if  really  carried  out,  not  only  on   the  Stahlwerksverband 
itself  but  far  beyond  its  domain.     On  the  other  hand,  a  great  and  serious 
defect  in  the  organization  of  the  Stahlwerksverband  consists  in  its  placing 
on  the  market  (at  present)  only  3  groups  of  its  products,  whereas  the  bal- 
ance (products  B),  principally  coarse  and  fine  sheet  iron,  wire,  bar  iron, 
and  pipes,   are  sold  by  the  works  themselves  at  their  own  prices;  the 
products,  however,  are  alloted  among  the  different  works  according  to  a  fixed 
quota.     Products  B  cause  keen  competition  among  the  various  works,  with 
the  exception  of  rolled  wire,  for  which  there  is  a  special  syndicate,  whereas 
for  the  drawn  wire  manufactured  from  the  rolled  wire,  a  price  convention 
has  been  established  since  the  beginning  of  January,  1909. 

173.  "Die  Unzulanglichkeit  der  heutigen  Schutzzollgesetzgebung  fur  die 
Eisenindustrie." 

174.  In  the  rail  cartel,  the  English  share  was  fixed  at  53.50  per  cent,  the 
German  share  at  28.83  Per  cent,  and  the  Belgian  at  17.67  per  cent.     The 
accession  of  the  French  works  (later  on)  caused  the  total  to  be  raised  to  104.8 
per  cent  for  the  first  year,  to  105.8  per  cent  for  the  second  year,  and  to  106.4 
per  cent  for  the  third  year,  in  which  the  French  participated  to  the  extent 
of  4.8,  5.8,  and  6.4  per  cent  respectively  during  the  three  years.     Germany's 
share,  after  the  accession  of  the  American  works,  amounted  to  21  percent. 
In  the  girder  cartel  (from  which  the  English  kept  aloof)  73.45  per  cent  was 
allotted  to  the  Germans,  15.05  per  cent  to  the  Belgians,  and  11.50  per  cent 
to  the  French;  the  latter,  however,  were   to  receive  a  larger  quota  were 
the  French  exports  to  exceed  those  of  1903. 

175.  See    L.    Glier:  Zur    neuesten    Entwicklung    der    amerikanischen 
Eisenindustrie,  in  Schmoller's  Jahrbuch  f.  Gesetzgebung  u.  Verwaltung, 
28th  year,  No.  i,  p.  150  seq.;  earlier  articles  see  ibid.,  27th  year,  No.  3, 
p.  229  seq.,  and  No.  4,  p.  43  seq. 

176.  Sombart   (Deutsche  Volkswirtschaft,    2nd  ed.,  p.  203)  also  says: 
"  Doubtless  a  good  share  of  the  growth  of  German  economic  activity  may 
be  ascribed  to  this  interest  taken  by  banks  and  bankers  in  productive 
economic  activity,  hampering  as  it  may  have  been  for  the  development  of 
the  banking  business  proper  (?).     Banks  have  been  directly  the  promoters 
of  the  spirit  of   enterprise  in  Germany;  they  have  been  pacemakers  for 
industry  and  trade." 


819 


National    M on  et ar y     Commission 

177.  The  statement  made  by  Paul  Wallich  (loc.  cit.,  pp.  6,  25)  that  in 
the  beginning  of  1870  the  Discontogesellschaft  had  the  largest  capital  and 
the  Darmstadter  Bank  the  next  largest  is  thus  seen  to  be  erroneous. 

178.  The  capital  of  the  Mitteldeutsche  Kreditbank  originally  (in  1856) 
amounted  to  8,000,000  thalers,  of  which  3,000,000  remained  in  the  hands 
of  the  institution,  while  in   1859   1,000,000  thalers'  worth  of  the  bank's 
own  stock  was  redeemed.     In  1869,  that  is  to  say,  near  the  end  of  the 
first  period,  the  paid-up  capital  of  4,000,000  thalers  was  increased  by 
1,000,000  to  a  total  of  5,000,000  thalers,  equal  to  15,000,000  marks. 

179.  This  was  the  last  Konzession  granted  to  a  domestic  bank,  since  the 
concession  system  was  abolished  soon  after. 

1 80.  Compare  Max  Wirth,  Handbuch  des  Bankwesens,  3d  ed.     Cologne, 
1883,  p.  377.     It  may  be  noted  in  this  connection,  that  this  book,  though 
frequently  quoted  as  an  authority,  is  in  many  points  superficial  and  unrelia- 
able.     In  particular,  the  author's  judgments  and  conclusions  are  largely 
biased  by  his  strong  prejudice  against  the  credit  banks  and  should  there- 
fore -be  accepted  with  caution.     For  that  matter,  the  author's  own  text 
under  the  heading  "German  private  banks"  comprises,   all  told,  about  5 
pages  (pp.  376-379  and  398-399);  the  rest  is  statistical  material. 

181.  Compare,  for  example,  Georg  Schanz,  article  "Banken"  in  Elster's 
Worterbuch  der  Volkswirtschaft,  Vol.  I,  p.  310. 

182.  Compare  Waldemar  Miiller,  Die  Organisation  des  Kredit-und  Zah- 
lungsverkehrs  in  Deutschland,  in  Bankarchiv,  Vol.  VIII  (1909),  Nos.  7,  8 
and  9. 

183.  Ibid. 

184.  In  English  banking  literature  the  term  "banker"  is  applied  to  a 
person  who  obtains  outsiders'  funds  for  the  purpose  of  circulating  them 
for  profit;  in  case  a  person  loans  his  own  capital,  he  is  regarded  as  a  capi- 
talist or  a  merchant,  but  not  a  banker. 

185.  On  this  point  see  among  others  Ad.  Wagner  in  Schonberg's  Hand- 
buch, I,  p.  437;  Adolph  Neumann-Hofer,  Depositengeschafte  und  Deposi- 
tenbanken   (Leipzig,  C.  F.  Winter,  1894),  p.  39  et  seq.;  M.  Schraut,  Die 
Organisation  des  Kredits  (Leipzig,  Dtmcker  &  Humblot,  1883),  p.  32. 

1 86.  Since  May  31,  1879,  deposits  at  the  Reichsbank,  in  conformity  with 
the  well-grounded  practice  of  most  other  central  banks  of  issue,  no  longer 
bear  interest.     As  a  result  deposits  repayable  after  notice  have  become 
quite  insignificant.     At  the  end  of  1900  they  amounted  to  only  319,881 
marks,  as  shown  in  Table  43,  p.  337,  of  the  jubilee  memoir  of  the  Reichs- 
bank (1876-1900).     On  the  contrary,  the  other  deposits  (on  giro  account, 
exclusive  of  giro  balances  of  the  imperial  and  state  treasuries)  at  the  end 
of  1908  amounted  to  285,303,000  marks. 

187.  Compare  Waldemar  Miiller,  loc.  cit.     (Bankarchiv,  8th  year.  No.  8, 
p.  1 1 6.) 

1 88.  It  is  true  that,  according  to  a  statement  by  an  expert  before  the 
bank  inquiry  commission,  a  certain  percentage  of  the  funds  deposited  at 
the  savings  banks  (reported  to  be  as  much  as  one-third  of  the  total)  likewise 


820 


The     German     Great     Banks 


bear  the  same  character  of  temporary  deposits.  But,  if  this  be  so,  it  means 
that  these  very  depositors,  who  are  said  to  belong  to  the  middle  and  higher 
classes,  by  taking  these  funds  to  the  savings  institutions  and  not  to  the 
banks,  deliberately  intend  to  give  to  these  funds  the  character  of  saving 
deposits  and  not  of  bank  deposits. 

189.  Compare  Waldemar  Miiller.     (Bankarchiv,  8th  year,  No.  8,  p.  117.) 

190.  Compare  Deutscher  Okonomist,  July  28,  1900,  p.  466,  and  Decem- 
ber 2,  1905  (23d  year,  No.  1197,  article  Das  Depositengeschaft  der  deut- 
schen  Banken);   also  Robert  Franz,    "Die  deutschen  Banken  im  Jahre 
1907"  (reprint  from  the  Deutscher  Oekonomist,  Berlin,  1908),  p.  14;  and 
Waldemar  Miiller,   in   Proceedings  of  the  Third  General  Convention  of 
German  Bankers  at  Hamburg,  Sept.  5  and  6,  1907,  p.  107. 

191.  Proceedings  of  the  Third  General  Convention  of  German  Bankers, 
pp.  107,  115;  Deutscher  Okonomist,  July  28,  1900,  and  Dec.  2,  1905;  Rob. 
Franz,  Die  deutschen  Banken  in  Jahre,   1906,  p.  n;  also  Caesar  Straus, 
Unser  Depositengeldersystem  und  seine  Gefahren,  Frankfurt,  1892,  p.  5, 
who  states  that  "up  to  the  present  time  it  was  in  the  main  large  industry 
and  the  wholesale  trades  which  were  the  depositors  of  the  German  bankers," 
i.  e.  the  same  classes  that  take  part  in  the  giro  business  of  the  Reichsbank. 

192.  They  also  include  the  so-called  hoards  (see  Ad.  Wagner,  loc.  cit., 
p.  61,  et  seq.),  that  is  to  say,  quantities  of  precious  metals  which  have  not 
yet  found  employment,  and  the  amounts  held  ready  for  the  purpose  of 
liquidating  international  payments,  or  for  the  arbitrage  business. 

193.  The  report  of  the  A.  Schaaffhausen'scher  Bankverein  for  the  fiscal 
year  1907  gives  the  total  amount  of  deposits  as  72,335,365  marks  and 
adds  that  "of  these  deposits  invariably  by  far  the  larger  part  consists  of 
interest-bearing  funds  turned  over  to  us  for  long  terms,  varying  for  the 
most  part  from  six  months  to  one  year." 

194.  Otto  Warschauer  in  Conrad's  Jahrbiicher,  3d  series,  Vol.  XXVII, 
p.  480  (1904).     See  however  the  correct  reasoning  by  the  same  author 
on  p.  35  of  his  book:  Physiologie  der  deutschen  Banken,  which  appeared 
only  one  year  before. 

195.  The  total  amount  to  the  credit  of  clients  in  the  check  departments 
of  the  German  post  office  was  70,955,349.88  marks  on  Dec.  i,  1909. 

196.  This  explains,   among  other  things,   Lansburgh's  discovery   (Das 
deutsche  Bankwesen,  p.   8)  that  in  the  case  of  the  smallest  joint-stock 
banks,  with  a  capital  up  to  100,000  marks  per  bank,  the  amount  of  out- 
siders'   moneys,    i.    e.,    deposits  and   credit  accounts,    exceeds   their   own 
capital  about  thirty-one  times,  while  in  the  case  of  the  large  banks,  with 
a  capital  of  over  10,000,000  marks  each  (except  the  large  Berlin  banks) 
the  ratio  is  only  2  to  i.     Hence  he  infers  that  it  is  not  the  larger  capital, 
but  publicity,  that  attracts  deposits  to  the  joint-stock  banks,  inasmuch 
as  an  increase  of  capital  is  accompanied   by  a  percentual   decrease  of 
outsiders'  moneys. 

197.  According  to  the  "Materials  bearing  on  the  development  of  pros- 
perity in  Germany  during  the  last  generation"   (Appendix  III  to  report 


821 


National    Monetary     Commission 

on  the  imperial  finance  reform  bill  of  1908,  No.  1043  of  Reichstag  docu- 
ments) pp.  1 8  and  19. 

198.  Statistisches  Jahrbuch  fur  das  Deutsche  Reich,  1903,  p.  187. 

199.  Ad.  Weber,    Depositenbanken   und   Spekulationsbanken.    Leipzig, 
Duncker  und  Humblot,  1902,  p.  82. 

200.  Edgar  Jaffe,  Das  englische  Bankwesen,  1905,  p.  135. 

201.  Verhandlungen  des  III  Allgemeinen  Deutschen  Bankiertages,  p.  96. 

202.  On  not  less  than  11,117,700  accounts. 

203.  For  1905  data  see  Paul  Marcuse's  Beobachtungen  iiber  das  Noten- 
bankwesen  in  den  Vereinigten  Staaten  von  Amerika,  Berlin,  1907,  p.  123. 

204.  Frequent  references  are  made  by  German  writers  to  these  enact- 
ments  (especially  regarding  the  cash  reserve)  in  advocacy  of  laws  and 
regulations  to  govern  the  German  bank  deposit  business.     These  refer- 
ences are  entirely  unwarranted,  for  the  American  regulations  mentioned 
in  the  text  (p.  204)  were  intended  to  regulate  not  the  deposit  business  of 
the  National  banks,   but  solely  their  note  operations.     (See  Neumann- 
Hofer,  loc.  cit.,  p.  35.) 

205.  I  have  no  means  of  verifying  the  data  of  Le  Figaro  of  May  20,  1906, 
according  to  which  at  the  end  of  1905  the  25  largest  credit  banks  held 
5,000,000,000  francs  of  deposits  (the  meaning  of  the  term  is  not  quite  clear), 
an  increase  of  more  than  3,500,000,000  francs  over  the  corresponding 
amount  in  1885,  when  1,159,005,000  francs  were  reported.     In  Austria, 
on  the  other  hand,  no  systematic  fostering  of  the  deposit  business  appears 
yet  to  have  commenced.     According  to  an  address  by  Karl  Morawitz, 
president   of   the   Anglo-Austrian   Bank,    before   the   Austrian   Economic 
Society  (Bank  Archiv,  Year  VI,  no.  5,  p.  64)  the  deposits  in  all  Austrian 
credit  banks  amounted  in  1895  to  only  250,000,000  kronen  ($50,750,000), 
while  the  deposits  in  the  savings  banks  totalled  about  5,000,000,000  kronen 
($1,015,000,000). 

206.  Joh.  Fr.  Schar.,   Die  Bank  im  Dienste  des  Kaufmanns  (Leipzig, 
1909,  G.  A.  Gloeckner),  pp.  122-126. 

207.  Deposits  in  the  Darmstadter  Bank  since  1894  comprise  all  daily- 
due  liabilities. 

208.  Data  taken  from  Deutscher  Oekonomist,   which  up   to    1908  in- 
cluded among  the  Berlin  banks  the  following  institutions:  Deutsche  Bank, 
Disconto-Gesellschaft,    Darmstadter    Bank,    Dresdner   Bank,    A.    Schaaff- 
hausen'scher     Bankverein,     Berliner     Handelsgesellschaft,     Commerz-und 
Disconto-Bank,  Nationalbank  fur  Deutschland  besides  five  institutions  of 
totally  different  character  viz:  Bank  des  Berliner  Kassenvereins,  Berliner 
Maklerverein,   Amerika  Bank   (now  liquidated),   Deutsche  Ueberseeische 
Bank    and    Deutsche    Treuhandgesellschaft    (German    Trust    Company). 
Since  1908  the  five  banks  last  named  no  longer  figure  among  the  "  Berlin 
banks"  in  the  compilations  of  the  Deutscher  Oekonomist. 

209.  Data  taken  from  Robert  Franz,  Die  deutschen  Banken  im  Jahre, 
1906,  p.  n,  und  im  Jahre,  1907,  p.  14. 


822 


The     German     Great    Banks 


210.  Compare,  among  others,  Ad.  Wagner,  Beitrage  zur  Lehre  von  den 
Banken  (Leipzig,   1857,  Leopold  Voss),  p.  70:  "The  banks  by  means  of 
credit  on  the  basis  of  deposits  may  raise  the  purchasing  power  of  a  country." 

211.  Compare  Rud.   Eberstadt,   Der  deutsche  Kapitalmarkt   (Leipzig, 
1901,  Duncker  &  Humblot),  p.  117  et  seq. 

212.  Compare  Felix  Hecht,  Die  Mannheimer  Banken  1870—1900  (Leip- 
zig, 1902,  Duncker  &  Humblot),  pp.  39,  40. 

213.  See  Felix  Hecht,  loc.  cit.,  p.  40. 

214.  Ad.  Weber,  Die  Rheinisch-Westfalischen  Provinzialbanken  und  die 
Krisis,  loc.  cit.,  p.  342. 

215.  K.  v.  Lumm,  Die  Kntwicklung  des  Bankwesens  in  Elsass-Lothrin- 
gen,  1901,  p.  165. 

216.  Joh.  Fr.  Schar,  Die  Bank  im  Dienste  des  Kaufmanns,  p.  136. 

217.  Edgar  Jaffe,  Das  englische  Bankwesen,  p.  143. 

218.  Alfred  Lansburgh,  Die  Verwaltung  des  Volksvermogens  durch  die 
Banken.     Reprint  from  "Die  Bank"  (Berlin-Charlottenburg,  1908),  p.  13 
et  seq. 

219.  The  money  circulation  through  the  German  post  office,  which  is  still 
carried  on  to  a  large  extent  by  means  of  cash-shipments,  amounted  in  1907 
to    13,500,000,000   marks,   i.    e.    to   about  37,000,000  marks  daily.     The 
money  required  by  the  mortgage  business,  which  until  recently  was  also 
on  a  cash  basis  likewise  reaches  enormous  amounts.     Thus  in   Prussia 
alone  the  yearly  amount  of  mortgages  recorded  averages  about  4.5  billion 
marks,  while  the  amount  of  mortgages  cancelled  each  year  is  about  2.3 
billion  marks. 

220.  Recently  many  savings  banks  have  made  efforts  to  extend  their 
activity  along  commercial  banking  lines  by  introducing  the  check  system 
(in  accordance  with  article  2,  sec.  i  of  the  check  act).     In  particular  the 
tenth  assembly  of  the  Union  of  Baden  Savings  Banks,  which  met  at  Miill- 
heim,  Baden,  on  November  10,  1908,  adopted  resolutions,  recommending 
the  use  of  checks  in  the  case  of  saving  deposits,  and  proposing  even  the 
establishment  of  regular  current  accounts  including  the  granting  of  credit. 
See  the  order  of  the  Prussian  minister  of  finance,  dated  April  20,  1909. 

221.  See  especially  Siegfried   Buff,    Der   gegenwartige  Stand   und  die 
Zukunft  des  Scheckverkehrs  in  Deutschland  (Munich,  1907,  E.  Reinhardt). 

222.  In  addition,  14,497  checks  were  redeemed  which  were  not  booked 
on  check  account,  making  a  total  of  61,816. 

223.  Gamp,    Der    landwirtschaftliche    Kredit    und    seine    Befriedigung 
(The  needs  of  agricultural  credit  and  how  to  meet  them).     Berlin,  1883. 

224.  Verhandlungen  des  Kgl.    (Preuss.)   Landes-Okonomie-Kollegiums, 
1906,  p.  17. 

225.  The  most  important  institutions  for  agricultural  credit  are   the 
following:  The  Imperial  Federation  of  Agricultural  Cooperative  Societies 
of  Germany  (Reich sverband  der  deutschen  landwirtschaftlichen  Genossen- 
schaften  in  Deutschland)  and  its  cooperative  agricultural  bank  at  Darm- 
stadt, with  about   11,896  cooperative  credit  societies,   savings  and  loan 


823 


National    Monetary     Commission 

banks,  belonging  in  1906  to  the  federation  and  its  sub-federations;  the 
General  federation  of  cooperative  rural  societies  for  Germany  (Generalver- 
band  landlicher  Genossenschaften  fur  Deutschland  [E.  V.])  at  Neuwied 
with  4,159  cooperative  credit  societies,  savings  and  loan  banks  belonging 
in  1906  to  the  federation  and  its  sub-federations;  the  Bavarian  state  Fed- 
eration of  agricultural  loan  associations  and  other  agricultural  coopera- 
tive societies  (Bayrischer  Landesverband  landwirtschaftlicher  Darlehns- 
kassenvereine  und  sonstiger  landwirtschaftlicher  Genossenschaften)  with 
unlimited  liability  at  Munich,  with  2,259  cooperative  societies,  savings  and 
loan  banks  in  1906;  the  Federation  of  agricultural  cooperative  societies  of 
the  Grand  Duchy  of  Baden  at  Karlsruhe  (Verband  landwirtschaftlicher 
Kreditgenossenschaften  im  Grossherzogtum  Baden),  with  384  cooperative 
societies,  savings  and  loan  banks  in  1907;  the  Federation  of  Wurttemberg 
cooperative  societies  (Verband  wiirttembergischer  Kreditgenossen- 
schaften) at  Ulm,  with  90  cooperative  societies  in  1907;  the  Federation  of 
cooperative  societies  of  the  Provinces  of  Posen  and  West  Prussia  (Ver- 
band der  Erwerbs-  und  Wirtschaftsgenossenschaften  in  den  Provinzen 
Posen  und  Westpreussen)  at  Posen,  with  225  cooperative  societies  in  1907; 
and  in  part  of  course  also  the  (Schulze-Delitzsch)  General  federation  of 
German  cooperative  societies  (Ltd.)  founded  on  self  help  (Allgemeiner 
Verband  der  auf  Selbsthilfe  beruhenden  deutschen  Erwerbs-  und  Wirt- 
schaftensgenossenschaften),  with  917  cooperative  societies  in  1907,  the 
members  of  which  constitute  about  one-third  of  the  total  membership  in 
all  (about  16,000)  cooperative  credit  societies.  For  details  on  the  above 
see  "Materialien  zur  Beurteilung  der  Wohlstandsentwicklung  Deutschlands 
im  letzten  Menschenalter "  (Data  bearing  on  the  progress  of  prosperity 
in  Germany  during  the  last  generation),  vol.  Ill  of  the  Appendices  to  the 
Imperial  Finance  Reform  Bill,  of  1908,  pp.  21-27. 

226.  See  Lansburgh,  loc.  cit.,  pp.  31-32. 

227.  Waldemar    Miiller,    Die    Organisation    des    Kredit-und-Zahlungs- 
verkehrs  in  Deutschland  (The  organization  of  the  system  of  credit  and 
payment  in  Germany)  in  Bank-Archiv,  Vol.  VIII,  1909,  No.  7,  p.  99. 

228.  Waldemar  Miiller,  ibid.     As  regards  the  Reichsbank,  according  to 
the  returns  made  to  the  bank  inquiry  commission,  there  were  in  the  entire 
German  Empire  70,480  firms  and  individuals  entitled  to  credit  in  its  bill 
business.     Of  these  (a)  merchants  and  trading  companies  constituted  41 
per  cent,  or  in  all  29,020  firms  and  individuals  for  the  entire  German 
empire;  (b)  manufacturers  and  industrial  companies  constituted  31  percent 
or  21,887  firms  and  individuals  in  the  Empire;  (c)  land  owners  and  estab- 
lishments engaged  in  agriculture  and    the  manufacture  of   agricultural 
products  14  per  cent,  9,589  firms  and  individuals  in  the  Empire;  (d)  co- 
operative societies  of  all  kinds  i  per  cent  or  883  firms  and  individuals  in 
the  Empire;   (e)  capitalists  (Rentner),  artisans,  and  similar  tradesmen  13 
per  cent,  or  9,101  firms  and  individuals  in  the  Empire.     According  to  the 
same  official  returns,  the  loans  on  collateral  security  made  by  the  bank  and 
outstanding  on  Dec.  31,  1907  (on  5,666  collateral  certificates)  amounted 


824 


The     German     Great     Banks 


to  a  total  of  364,297,700  marks.     Of  this  total,  1,972,200  marks  were  loaned 
to  agriculture  and  allied  rural  industries  (on  249  collateral  certificates). 

229.  Thus  among  others  Lansburgh  in  an  article  in  "Die  Bank"  pub- 
lished separately  under  the  title  "Die  Verwaltung  des  Volksvermogens 
durch  die  Banken"   (The  administration  of  the  national  wealth  by  the 
banks),  p.  26,  which  I  shall  have  occasion  to  notice  later. 

230.  Materialien  zur   Beurteilung  der  Zusammenhange  zwischen  dem 
offentlichen  Schuldenwesen  und  dem  Kapitalmarkt  (material  to  elucidate 
the  connection  between  the  public  debt  system  and  the  capital  market). 
Appendices  to  Imperial  finance  reform  bill  of  1908,  Part  IV,  No.  1087  of 
Reichstag  Documents,  p.  249. 

231 .  "According  to  competent  estimates,"  foreign  countries  had  absorbed 
by  the  middle  of  1908  no  more  than  400,000,000  marks  of  imperial  bonds 
and  only  between  80,000,000  and  105,000,000  marks  of  Prussian  consols. 
(Ibid,  p.  247,  II.) 

232.  See   Felix  Hecht,  Die  Mannheimer   Banken,   1870-1900,   Leipzig, 
Duncker  &  Humblot,  1902,  p.  23:  "Each  credit  bank  .  .  .  wants  to  be 
studied  by  itself." 

233.  Thus  Felix  Hecht,  Lehren  der  Krisis  (Lessons  of  the  Crisis)  (Sept.  15, 
1903),  loc.  cit,  p.   140.     The  same  author  asserts  however  in  his  paper 
before  the  general  meeting  of  the  Mitteleuropaischer  Wirtschaftsverein, 
Sept.  15,  1908  (Publications  of  the  Verein,  No.  6,  p.  75)  that  the  German 
tendency  to  engage  in  extensive  oversea  commerical  and  industrial  enter- 
prises has   "undoubtedly"    taken  much  German  capital  from  domestic 
industrial  enterprises  and  from  legitimate  domestic  credit." 

234.  Adolph  Weber  justly  says:  "  No  country  has  had  so  rich  or  so  bitter 
an  experience  in   the  results  of  unsound  credit-granting  as   England." 
(Depositenbanken  und  Spekulationsbanken,  p.  109.) 

235.  Alfred  Lansburgh,  Die  Verwaltung  des  Volksvermogens  durch  die 
Banken    (reprint   from  "Die   Bank,"  Beiiin-Charlottenburg,   1908).     The 
merit  of  this  book  is  that  it  has  facilitated  the  study  and  appreciation  of  the 
smaller  banks,  with  a  capital  of  less  than  1,000,000  marks  down  to  100,000 
marks,  and  even  of  the  smallest  banks  with  a  capital  of  less  than.  100,000 
marks,  by  supplying  careful  statistics  (Tables  IV  and  V  and  explanatory 
notes,  which  in  the  main  are  to  the  point).     It  should  be  said,  however, 
that  in  this  field  Der  Deutsche  Oekonomist  (mentioned  by  the  author  on 
p.  24)  had  already  done  valuable  preliminary  work,  though  limited  to  the 
capital   stock   and   the   deposits    (fremde   Gelder)    exclusive   of  reserves. 
Adolph  Weber,  in  Die  Rheinisch-Westfalischen  Provinzialbanken  und  die 
Krisis  (the  Rhenish- Westphalian  Provincial  Banks  and  the  Crisis),  1903, 
p.  362-371,  which  Lansburgh  does  not  mention,  was,  so  far  as  I  know,  the 
first  to  study  the  activities  of  the  small  banks  of  this  district  in  detail  and 
with  valuable  results.     By  supplying  the  omissions  of  the  Okonomist  and 
by  analyzing  the  small  banks  of  all  Germany,  on  the  basis  of  their  balance 
sheets  and  their  activity,  Lansburgh  has  performed  a  valuable  service,  par- 
ticularly from  the  social  standpoint.     We  must  not  forget  however,  that 


825 


National    Monetary     Commission 

the  deposits  (fremde  Gelder)  in  all  these  small  banks  amount  to  no  more 
than  4  per  cent  of  the  deposits  of  all  credit  banks. 

In  his  later  work,  containing  about  the  same  material,  the  title  "The 
German  Banking  System"  is  inappropriate  and  misleading,  for  the  entire 
text  covers  only  63  pages,  of  which  12  are  devoted  to  the  small  banks 
(pp.  22-23).  Since  the  author  admits  this  in  his  preface,  he  ought  to 
have  adopted  a  more  appropriate  title.  In  passing  I  wish  to  note  that  I 
do  not  share  the  author's  opinion  (p.  7)  that  there  are  in  Germany  6,000 
private  bankers.  According  to  my  estimate  the  (purely)  private  bankers 
number  about  4,000. 

236.  Especially  on  page  55   of  the  reprint  from  the  periodical   "Die 
Bank"  (Berlin-Charlottenburg),  mentioned  in  note  235. 

237.  The  first  point  is  not  regarded  by  Lansburgh  as  a  very  serious 
reproach,  as  is  evident  from  his  remarks  on  p.  8:  "The  old  controversy  as 
to  whether  Germany  is  to  be  an  agricultural  or  an  industrial  state,  has  long 
ago  been  answered  by  the  general  development  of  things.     No  political 
upheaval  can  reverse  this  development.     That  would  be  a  misfortune." 
His  wish  is  solely  that  the  process  should  go  on  without  shock  by  way  of 
evolution  and  not  of  revolution,  and  that  the  available  funds  of  the  nation 
should  not  be  thrust  into  industry  by  sheer  force.     In  this  he  is  entirely 
right. 

238.  Die  Bank,  No.  6,  June  1908,  p.  543. 

239.  Riesser,  Scheckverkehr  und  Scheckgesetz  (Check  Circulation  and 
Check  Legislation),  No.  4  of  the  "  Veroffentlichungen  des  Mitteleuropa- 
ischen  Wirtschaftsvereins  in  Deutschland,"  Berlin,  Putkammer  und  Muhl- 
brecht,  1907. 

240.  The  causes  which  compel  the  German  credit  banks  to  extend  cur- 
rent account  credit  preferably  to  trade  and  industry,  and  only  to  a  slight 
extent  to  craftsmen,  small  traders  and  agriculturists,  have  been  mentioned 
briefly  before  (p.  223  and  following). 

241.  The  number  of  such  persons  would  thus  be  counter-balanced  in  a 
remarkable  way  by  the  number  of  persons  who  according  to  the  complaints 
heard  in  savings  banks  circles,  have  been  won  away  from  them  by  the  credit 
banks,  one  third  of  whose  total  deposits  are  claimed  to  be  made  up  of 
"saving  deposits." 

242.  "Die  Bank,"  June,  1908,  p.  544. 

243.  See  Herman  Mauer,   Das  landschaftliche  Kreditwesen   Preussens 
(The  Prussian  System  of  Cooperative  Land  Credit),  (Strassburg,  Karl  J. 
Triibner,  1907);  Felix  Hecht,  Die  Landschaften  und  landschaftsahnlichen 
Kreditinstitute  in  Deutschland  (the  Agircultural  Credit  federations,  and 
similar  organizations  in  Germany),  Vol.  I,  Statistics  (Leipzig,  Duncker  & 
Humblot,  1908). 

244.  Die  Organisation  des  langfristigen  gewerblichen  Kredits   (in  the 
Publications  of  the  Mitteleuropaischer  Wirtschaftsverein,  No.  6,  pp.  59-86.) 

245.  Die  Mannheimer  Banken,  1870-1900,  Leipzig,  Duncker  und  Hum- 
blot,  1902.     Lehren  der  Krisis.     Paper  read  at  the  general  meeting  of  the 


826 


The     German     Great    Banks 


Verein  fur  Sozialpolitik,  15  September  1903  (Vol.  CXIII  of  the  publications 
of  the  Verein  fur  Sozialpolitik),  and  monograph  on  "Die  Organisation  des 
gewerblichen  langfristigen  Kredits  (The  Organization  of  long-time  industrial 
credit),  1908. 

246.  A  larger  degree  of  publicity,  as  for  instance  the  more  frequent 
publication  of  summary  balance  sheets  (Rohbilanzen),  while  practicable 
per  se,  is  not  likely  to  throw  much  more  light  on  the  condition  of  the 
institution 

247.  Berlin,  Puttkammer  &  Miihlbrecht,  1909,  p.  340—361. 

248.  In  "Die  Lehren  der  Krisis,"  p.  141,  and  in  the  monograph  on  "Die 
Mannheimer  Banken,"  p.  45 

249.  Ad.  Weber,  Die  rheinisch-westfalischen   Provinzialbanken,  in  the 
Publications  of  the  Verein  fur  Sozialpolitik,  Vol.  CX,  p.  344.      In  this 
monograph — long  before  Lansburgh, — the  activity  of  the  small  banks  in 
the  Rhine  country  and  Westphalia  has  been  treated  in  great  detail  and 
duly  appreciated,  pp.  362-371. 

250.  So  far  as  we  can  foresee,  this  policy  of  the  mortgage  banks  (except 
in  a  few  instances  where  loans  are  made  on  warehouses)  is  not  likely  to  be 
changed,  even  if  it  be  true  that  the  mortgage  bank  act  (art.  12)  does  not 
stand  in  the  way  of  loans  on  factories,  as  Ernst  Sontag  tried  to  prove  (Die 
Griindung  einer  Industrie-Hypothekenbank — [The  Establishment  of  a  mort- 
gage bank  for  Industry].  Kattowitz,  Gebr.  Bohm,  1909).     The  mortgage 
banks  are  not  likely  to  regard  factories  as  easily  marketable  risks  nor 
must  they  underestimate  the  risk  that  the  buildings  may  remain  idle  and 
yield  no  return. 

251.  Waldemar  Miiller  (Bank-Archiv  No.  7,  Jan.  i,  1909,  p.  98). 

252.  See  Otto  Jeidels,  Das  Verhaltnis  der  deutschen  Grossbanken  zur 
Industrie  (The  relation  of  the  great  German  banks  to  industry)  Leipzig, 
Duncker  und  Humblot    1905,   p    34.     In  just  such  cases  however,   the 
central  institution  proposed  by  Hecht  would  not  be  authorized  to  inter- 
vene    (Veroffentlichungen     des    Mitteleuropaischen     Wirtschaftsvereins, 
Berlin,  1908,  vol.  6,  No.  5,  p.  79). 

253.  We  may  readily  suppose,  for  instance,  that  the  repayment  in  annuity 
form  of  long-time  industrial  loans  granted  by  the  credit  banks  may  be  made 
a  normal  part  of  the  contract  in  the  same  way  as  is  proposed  in  connec- 
tion with  the  central  bank. 

254.  The  question  of  the  profitableness  of  the  enterprise   (Veroffent- 
lichungen, p.  85)  which  Hecht  prefers  to  leave  untouched  would  of  course 
be  largely  affected  by  the  greater  or  smaller  amount  of  capital  stock;  but  on 
this  point,  too,  Hecht  has  nothing  to  say. 

255.  This  is  also  the  opinion  of  Karl  Diehl,  Der  Bau  einer  neuen  Organi- 
sation des  langfristigen  industriellen  Kredits  (Plan  for  a  new  organization 
of  long-time  industrial  credit),  in  the  Bank-Archiv  of  March   15,    1909, 
Vol.  VIII,  No.  12,  p.  190.     The  article  contains  a  number  of  other  perti- 
nent criticisms  of  the  proposed  central  institution.     See  also  Frankfurter 
Zeitung  (Abendblatt)  of  Sept.  25,  1908,  and  the  criticisms  of  Bank  Director 


827 


National    Monetary     Commission 


Freiherr  von  Pechmann,  in  the  Veroffentlichungen  des  Mitteleuropaischen 
Wirtschaftsvereins,  No.  6,  pp.  86-95 ;  also  A.  M.  Ernst  Sontag,  op.  cit 

256.  Eugen   Lopuszanski,    Einige   Streiflichter   auf   das   osterreichische 
Bankwesen  (Some  side-lights  on  the   Austrian  bank  system)   in  Volks- 
wirtschaftliche  Wochenschrift  of  Al.  Dorn,  Vol.  L,  No.  1305,  Dec.  31,  1908, 

P-  437- 

257.  See  Veroffentlichungen  des  Mitteleuropaischen  Wirtschaftsvereins, 

No.  6,  p.  75. 

258.  It  is  to  be  noted,  however,  that  in  the  transactions  of  the  Mit- 
teleuropaische   Wirtschaftskonferenz   in   Berlin,    May    17    and    18,    1909, 
Hecht  himself  to   all   appearances   assumed   the   necessity   of  legislative 
regulation  of  the  matter,  which  he  evidently  had  not  contemplated  before. 

259.  Security  in  the  shape  of  a  guarantee  or  a  life  insurance  policy  pledged 
is  of  little  practical  consequence  in  connection  with  the  bonds  discussed 
above,  so  that  we  may  safely  ignore  such  cases  here.     Loewy  (Rawitsch) 
is  of  a  different  opinion  (Bank-Archiv,   Vol.  VIII,  p.   241,  et  seq.);  on 
principle  he  is  in  favor  of  the  idea  of  a  central  institution. 

260.  The  law  (art.  i)  becomes  applicable  the  moment  it  is  found  that 
the  object  of  the  activity  of  the  enterprise  is  actually  directed  to  this  end. 
It  makes  no  difference  whether  this  object  of  the  undertaking  is  specifically 
indicated  in  the  charter  or  by-laws  or  not;  otherwise  it  would  be  very  easy 
to  make  article  i  of  the  mortgage  bank  act  inoperative,  by  simply  omitting 
to  mention  in  the  charter  or  by-laws  this  object  of  the  undertaking. 

261.  Ernst  Sontag,  op.  cit. 

262    Veroffentlichungen  des  Mitteleuropaischen  Wirtschaftsvereins,  No. 
6,  p.  66. 

263.  See  Felix  Hecht,  Denkschrift  iiber  die  Organisation  des  gewerb- 
lichen  langfristigen  Kredits,  p.  10. 

264.  See  Siegfried  Buff,  Das  Kontokorrentgeschaft  im  deutschen  Bank- 
gewerbe  (current-account  transactions  in  German  banking).     J.  G.  Cot- 
tasche  Buchhandlung  Nachf.,  Stuttgart  &  Berlin  1904  (issued  as  No.  60  of 
the  Volkswirtschaftliche  Studien,  edited  by  Brentano  &  Lotz). 

265.  See  Joh.   Friedr.   Schaer,   Die  Bank  im  Dienste  des  Kaufmanns 
(the  bank  and  its  service   to   the   merchant),  Leipzig,  G.  A.  Gloeckner, 
1909,  p.  19. 

266.  In  its  very  first  annual  report  (1853)  the  Darmstadter  Bank  stated 
that  in  accordance  with  the  instructions  of  the  government  of  the  Grand 
Duchy  of  Hesse,  the  authorities  of  the  customs  department  granted  credit 
on  customs  duties  to  all  merchants  on  their  bills  provided  with  the  guar- 
antee (Aval)  of  the  bank. 

267.  We  do  not  agree  with  Joh.  Fr.  Schaer's  view  (loc.  cit.,  pp.  23-24) 
that  under  the  provisions  of  the  law  governing  bank  deposits,  "the  bank 
having  the  care  of  securities,  is  entitled  to  represent  the  shares  at.  '1-^  gen- 
eral meeting,  unless  the  depositor  has  signified  his  wish  to  the  contrary" 
(see  Riesser,  Kommentar  zum  Bankdepotgesetz,  2d  ed.,  Berlin,  1906,  Otto 
Liebmann,  p.  42,  sec.  3,  d,  /?).     On  the  contrary  the  bank  must  not  assume 


828 


The     German     Great     Banks 


to  represent  the  shares  unless  specifically  authorized  by  the  depositor,  for 
such  representation  involves  a  "disposition"  of  the  shares,  limited  though 
it  be,  to  which  the  bank  taking  care  of  the  securities  is  not  entitled. 
The  authorization  need  not  however  be  made  out  in  this  case  in  the  form 
prescribed  in  article  2  of  the  bank  deposit  law. 

268.  Bank-Archiv,  Jan.  15,  1909,  Vol.  VIII,  No.  8,  pp.  114-15. 

269.  Substantially    the   same   description   is   given    by   Joh.    Friedrich 
Schaer,  loc.  cit.,  p.  46,  B,  a. 

270.  For  the  Deutsche  Bank  see  circular   (No.  4)   reprinted  by  Joh. 
Friedr.  Schaer,  loc.  cit.,  p.  130. 

271.  The  terms  for  current  accounts  of  the  Disconto-Gesellschaft,  the 
Dresdner   Bank,    and   the   Berliner   Handelsgesellschaft,   in   the  form  in 
which  they  were  in  force  immediately  before  1904,  are  reprinted  in  Siegfr. 
Buff,  loc.  cit.,  pp.  110-125. 

272.  See  Waldemar  Miiller,  Bankarchiv,  Vol.  VIII,   No.  8,  p.  115,  and 
Joh.  Fr.  Schaer,  p.  74,  No.  i. 

273.  Bank-Archiv,  Vol.  VIII,  No.  8  (Jan.  15,  1909),  p.  115. 

274.  See  Ad.  Weber,  Die  rheinisch-westfalischen  Provinzialbanken  und 
die  Krisis,  loc.  cit.,  p.  342. 

275.  See  Felix  Hecht,  Die  Katastrophe  der  Leipziger  Bank  (The  col- 
lapse of  the  Leipziger  Bank)  in  "Storungen  im  deutschen  Wirtschaftsleben 
wahrend  der  Jahre  1900  ff."     (Disturbances  in  German  economic  life  dur- 
ing 1900  and  the  following  years),  Vol.  VI,  Geldmarkt-Kreditbanken,  p. 

384)- 

276.  In  balancing  a  current  account   the  interest  is  figured  thus:  The 
interest-bearing  amounts   (the  result  of  multiplying  the  capital  by  the 
number  of  days  and  dividing  by  100)  are  first  determined,  (in  Berlin  the 
month  is  considered  as  thirty  days)  and  entered  on  the  credit  or  debit  side 
according  as  the  customer  is  to  be  credited  with  interest  or  to  be  debited 
therewith.     The  current  account  is  usually  kept  by  double  entry  and  bal- 
anced daily  as  far  as  practicable. 

277.  See  Otto  Jeidels,  loc.  cit.,  p.  33. 

278.  See  Otto  Jeidels,  loc.  cit.,  p.  169-171,  for  an  account  of  the  distri- 
bution by  localities  and  industries  of  the  industrial   corporations  with 
which  the  large  banks  are  connected,  either  through  the  appointment  of 
representatives  on  the  supervisory  boards  of  the  corporations  or  by  serv- 
ing as  their  fiscal  offices  for  the  payment  of  interest  and  dividends  or  the 
redemption  of   bonds  when   mature.     In  spite  of  his  declaration  to  the 
contrary,  Jeidels  overestimates  the  importance  of  such  fiscal  agencies. 

279.  Robert  Franz,   Die  deutschen  Banken  im  Jahre   1908,    (German 
banks  in  1908),  p.  22. 

280.  Even  such  an  arrangement  could  but  seldom  be  made  with  the 
German  retailer.     Contrary  to  the  custom  prevailing  in  France,  he  will, 
as  a  rule,  not  allow  himself  to  be  drawn  upon  nor  does  he  give  bills.    Never- 
theless he  demands  long  terms   of   credit  and  settlement  without  being 


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National    Monetary     Commission 

willing  to  obligate  himself,  as  in  the  case  of  bill  credit,  to  make  payment  at 
the  end  of  the  period. 

281.  In  England,  too,  bills  of  this  kind  drawn  on  foreign  countries  are 
not  discounted  by  the  banks.     (See  Edgar  Jaffe,  Das  englische  Bankwesen 
[the  English  banking  system]  p.  142.)     They  are  at  once  sold  to  foreign 
bill  brokers.     For  other  particulars  see  Jaff6,  pp.  123  and  124. 

282.  According  to  the  Jubilee  Report  of  the  Reichsbank  (p.  78),  this 
practice  explains  why  the  average  value  of  the  bills  reaching  the  Reichsbank 
rose  from  a  minimum  of  1,421  marks  in  1878  to  a  maximum  of  1,936  marks 
in  1900.     The  amounts  drawn  on  banks  and  bankers  are  nearly  always  for 
very  large  sums.     However  in  proportion  as  the  large  banks  are  making 
their  way  into  the  provinces  by  means  of  their  branches,  discounting  there 
also  the  bills  of  small  borrowers,  the  average  amount  of  the  bills  discounted 
declines. 

283.  Edgar  Jaffe,  loc.  cit.,  p.  124. 

284.  Walther    Lotz,    Die    Technik    des    Emissionsgeschafts,    Leipzig. 
Duncker  &  Humblot,  1890,  p.  58. 

285.  Heiligenstadt,  in  the  Proceedings  of  the  Bank  Inquiry  Commission 
of  1908  on  points  1-4  of  the  question  sheet  (Berlin,  1909,  Imperial  Printing 
Office),  p.  25. 

286.  Under  the   old  stock   exchange  law,  in  case  of  speculation  on  a 
cash  basis  the  following  method  was  often  resorted  to  among  provincial 
banks  and  private  bankers.     The  customer  engaged  in  speculation  would 
make  part  payment  on  the  securities  bought  for  him  and  left  on  deposit 
with  his  bank  or  banker.     The  balance  of  the  purchase  price,  which  was 
to  be  paid  at  once,  would  be  obtained  by  having  the  bank  or  banking  estab- 
lishment draw  on  another  banking  institution,  or  else,  in  order  to  cover  up 
the  true  character  of  the  bill  as  a  finance  bill,  the  person  on  whose  account 
the  securities  were  bought  would  draw  on  a  provincial  bank  or  private 
banker,  that  is  on  his  own  banker,  who  wrould  thereupon  discount  his  own 
acceptance.     See  W.  Prion,  Das  deutsche  Wechseldiskontgeschaft.     (Bill 
discounting  in  Germany),  Leipzig,  Duncker  &  Humblot,  1907,  p.  42. 

287.  See  among  others  Der  Deutsche  Oekonomist  of  Aug.  4,  1900,  p.  476, 
July  29,  1905,  p.  414,  and  Rob.  Franz,  Die  deutschen  Banken  im  Jahre, 
1907,  p.  15  &  1 6.     For  the  Berlin  banks,  during  1894-1899  the  amount 
fluctuated  between  one-half  and  two-fifths.     (See  Ernst  Loeb,  loc.  cit., 
p.  267.) 

288.  Ad.  Weber,  Depositenbanken,  etc.,  p.  117. 

289.  Schmoller,  Grundriss,  II,  p.  493. 

290.  The  separation  of  the  acceptances  from  the  avals  was  not  practi- 
cable because  of  difficulties  in  the  technique  of  accounting,  the  two  items 
appearing  combined  in  the  balance  sheets  of  many  banks. 

291.  See  W.  Prion,  loc.  cit.,  p.  53. 

292.  vSpecial  literature :  W.  Prion,  Das  deutsche  Wechseldiskontgeschaft. 
Hit  besonderer  Beriicksichtigung  des  Berliner  Geldmarktes  (The  German 
bill  discounting  business.     With  special  reference  to  the  Berlin  money 

830 


The     German     Great     Banks 


market).  (Leipzig,  Duncker  und  Humblot,  1907.)  No.  127  of  Staats- 
und  Sozialwissenschaftliche  Forschungen,  edited  by  von  Schmoller  and 
Bering.  An  excellent  work. 

293.  This  fact,  repeatedly  established  at  the  hearings  of  experts  before 
the  bank  inquiry  commission,  is  also  affirmed  by  W.  Prion  (loc.  cit.,  p.  32). 

294.  See  W.  Prion,  loc.  cit.,  p.  61,  where  he  mentions  that  Hamburg  has 
a  quotation  for  the  private  discount  of  prime  bills  and  a  special  quotation 
for  commercial  bills,  the  margin  between  them  amounting  to  one-fourth 
to  one-eighth  of  i  per  cent ;  and  the  same  is  true  of  London,  where  there  is 
a  difference  of  one-half  of  i  per  cent  between  the  quotation  of  bank  bills 
and  of  trade  bills. 

295.  This  device,  hardly  perceptible  to  outsiders,  of  raising  the  rate  of 
private  discount  in  individual  cases,  even  though  the  amount  be  trifling, 
may  thus  be  used  by  the  Bourse  as  a  warning  signal.     In  the  case  of  an 
excessive  straining  of   credit  on  the  part  of   some  bank,  it  may  perform 
within  banking  circles  the  same  functions  and  exert  the  same  influence  as 
the  ruder  and  ostentatious  means  of  a  general  raise  of  the  official  rate  of 
bank  discount,  in  case  of  a  general  overstraining  of  credit. 

296.  See  W.  Prion,  loc.  cit.,  p.  33. 

297.  Waldemar  Miiller,  loc.  cit.  (Bank-Archiv.,  Vol.  8),  No.  8,  p.  117. 

298.  Loc.  cit.,  p.  51. 

299.  W.  Prion,  loc.  cit.,  p.  53. 

300.  The  number  of  note  banks  was  as  follows :  1883-1886,18;  1887,17; 
1888,     16;  1889,     14;   1890,     13;  1891-1893,    9;  1894-1900,    8;  1901,    7; 
1902-1904,   6;  1905-1908,   5    (Reichsbank,   Bayerische  Notenbank,  Sach- 
sische  Bank,  Wurttembergische  Notenbank,  and  Badische  Bank). 

301.  The  number  of  mortgage  banks  varied  between  24  in  1883,  39  in 
1900-1902,  and  40  in  1903-1908. 

302.  See  Rob.  Franz,  Die  deutschen  Banken  im  Jahre,  1907,  p.  12,  and 
Rob.  Franz,  Die  deutschen  Banken  irn  Jahre,  1908,  p.  14      That  enumera- 
tion, however,  includes  only  credit  banks  having  a  capital  each  of  at  least 
1,000,000  marks,  while  in  the  case  of  mortgage  banks  no  such  restriction 
is  made. 

303.  The  amounts  of  bills  held  by  the  six  great  banks  of  Berlin  vary 
somewhat  from  those  given  by  W.  Prion,  loc.  cit.,  p.  208  (514,  559,  671, 
697,  742,  740,  914,  1017  million  marks). 

304.  In  regard  to  the  figures  given  above,  it  is  to  be  noted  that  in  conse- 
quence of  the  circulation  of  bills  between  central  banks  and  branch  banks, 
certain  items  have  doubtless  been  counted  several  times. 

305.  Edgar  Jaff£,  Das  englische  Bankwesen,  p.  124  and  pp.  141-144. 

306.  Edgar  Jaffe,  loc.  cit.,  p.  125. 

307.  Edgar  Jaffe,  loc.  cit.,  p.  145. 

308.  The  acceptance  commission  at   the  foreign  banks  is  one-half  per 
cent. 

309.  Edgar  Jaffe,  loc.  cit.,  pp.  148-151. 


831 


National    Monetary     Commission 


310.  It  is  to  be  noted  that  the  official  discount  in  London  represents  a 
minimum  rate  of  discount,   whereas  the  official  rate  of  discount  of  the 
German  Reichsbank  has  rather  the  meaning  of  a  maximum  rate  of  dis- 
count, so  that  the  two  are  not  strictly  comparable.     Furthermore,    the 
Bank  of  England,  unlike  the  German  Reichsbank,  reserves  the  absolute 
right  to  decline  to  discount  even  "legitimate"  bills  when  not  convenient, 
so  that,  especially  in  times  of  overstrained  credit,  and  when  the  Bank  is 
planning  a  raise  of  discount,  it  does  not  discount  all  the  bills  presented. 
Finally,  the  Bank  of  England,  unlike  the  German  Reichsbank,  discounts 
only  the  bills  of  regular  customers.     Nevertheless  the  variations  in  the 
rates  of  discount  in  Germany  and  England  run  entirely  parallel.     How- 
ever, the  rate  of  discount  in  England  has  invariably  been  higher  than  in 
Germany  during  the  last  fifty-six  years,  the  proportion  during  that  time 
being  as  100:122.     (On  an  average  the  difference  is  0.63  per  cent.)     See 
the  exceedingly  instructive  work  by  Joh.  Fr.  Schaer,  Zahlungsbilanz  und 
Discont  (Berlin,  1908,  S.  Simon),  pp.   no  and  in.     On  pp.  101  and  102, 
on  the  basis  of  statements  by  Karl  Waidmeyer,  general  secretary  of  the 
Austro-Hungarian  Bank,  are  given  the  average  rates  of  official  discount  in 
England,  France,  Germany  and  Austria-Hungary  from  1852  to  1907,  that 
is  to  say,  for  fifty-six  years,  the  years  of  crisis  being  noted,  while  on  p.  107 
are  given  the  averages  of  the  official  discount  of  the  last  five  decades  for 
the  same  countries.     The  differences  in  the  figures  of  the  rates  of  discount 
in  Germany  as  compared  with  those  of  England,  France  and  Austria- 
Hungary,  are  due,  in  the  foremost  place,  to  the  difference  of  the  economic 
situation  and  of  the  balance  of  payment,  as  well  as  to  the  differences  in  the 
organization  of  the  money  markets  and  banks. 

311.  See  W.  Prion,  loc.  cit.,  pp.  74,  75. 

312.  Loc.  cit.,  p.  75. 

313.  See  my  statements  before  the  bank  inquiry  commission  (Trans- 
actions of  the  full  commission,  under  Numbers  I-V  of  the  question  sheet, 
Berlin,  Ernst  Siegf.  Mittler  &  Sohn,  1904),  pp.  70,  71. 

314.  Loc.  cit.,  p.  55. 

315.  See  W.  Prion,  loc.  cit.,  pp.  77-95. 

316.  My  own  views,  coinciding  with  the  above,  were  set  forth  in  the 
proceedings  of  the  bank  inquiry  commission,  under  Numbers  I-V  of  the 
question  sheet  (Berlin,  1909),  p.  259.     By  a  misprint,  the  word  nickt  (not) 
was  omitted  in  the  phrase  "je  nach  den  Verhaltnissen  des  Geld-  oder 
Warenmarktes  uberhaupt   nicht   zu   einer   Realisierung   fiihrt"   ("is   not 
realized  on,  in  accordance  with  the  conditions  prevailing  in  the  money 
market  or  the  commodity  market"). 

317.  See  W.  Prion,  loc.  cit..  p.  93. 

318.  Loc.  cit.,  p.  78. 

319.  Friedr.  Leitner,  Das  Bankgeschaft  und  seine  Technik,  Frankfurt- 
am-Main,  1903,  J.  D.  Sauerlander,  publisher,  pp.  259-260. 

320.  Lombard  loans  to  banks  and  others  (bankers  and  other  financial 
concerns)  are  greatly  influenced  by  the  demands  of  commerce,  industry 


832 


The     German     Great     B 


a  n 


and  other  lines  of  activity,  which  demands  are  largely  concentrated  in  the 
banks,  and  are  particularly  heavy  at  the  close  of  the  year  and  at  other 
customary  dates  of  settlement  (schwere  T ermine).  As  an  illustration  of 
this  influence  it  may  be  mentioned  that  on  December  31,  1907,  the  total 
amount  of  lombard  loans  of  the  Reichsbank  (in  5,666  pledge  receipts)  was 
364,297,700  marks,  distributed  as  follows:  To  joint-stock  banks  (on  497 
pledge  receipts)  163,100,300  marks,  to  other  money  and  credit  institutions 
(on  916  pledge  receipts)  125,399,000  marks.  It  is  also  interesting  to  note 
the  proportion  of  lombard  loans  granted  to  joint-stock  banks  and  those  to 
private  banks,  etc.,  at  the  two  dates  of  comparison  (March  31,  1908,  and 
December  31,  1907). 

Before  the  meeting  of  the  bank  inquiry  commission  and  to  some  extent 
during  its  proceedings,  there  was  some  talk  of  compelling  the  Reichsbank 
to  establish  a  certain  limit  which  must  not  be  exceeded  in  the  discounting 
of  bills  and  the  granting  of  lombard  loans  on  dates  of  settlement  (schwere 
T  ermine),  especially  at  the  close  of  each  quarter,  the  aim  being  to  improve 
the  condition  of  the  bank.  In  the  course  of  the  proceedings  this  demand 
was  dropped.  In  fact,  the  close  of  the  quarter  is  precisely  the  time  at 
which  the  most  legitimate  demands  of  commerce  arise,  which  must  be 
met  almost  entirely  by  the  granting  of  short-term  credit,  a  task  which  the 
Reichsbank  can  not  shirk,  since  the  very  purpose  of  its  existence  is  "to 
facilitate  payments,"  while  another,  though  not  equally  essential  part  of 
its  functions  is  "to  promote  the  utilization  of  available  funds"  (art.  12, 
sec.  i  of  the  bank  act). 

On  this  point  Waldemar  Miiller  justly  remarks:  "To  grant  credit  and 
issue  notes  in  times  of  business  calm,  no  central  bank  of  issue  with  the 
privileges  of  the  Reichsbank  is  needed;  even  so  defective  a  note  bank 
system  as  that  of  the  United  States  suffices  for  that  purpose.  It  is  in 
times  of  heavy  demand  and  in  times  of  crisis  that  the  bank  has  to  prove 
itself  equal  to  the  task  assigned  to  it  by  the  bank  act"  (Bank-Archiv, 
Vol.  8,  No.  9,  Feb.  i,  1909,  p.  130). 

321.  Felix  Hecht,  Die  Mannheimer  Banken,  p.  40. 

322.  A.  Weber,  Depositenbanken  und  Spekulationsbanken,  p  97. 

323.  Waldemar  Miiller,    Die  Organisation  des  Kredit-  und  Zahlungs- 
verkehrs  in  Deutschland  (Bank-Archiv,  15  January,  1909,  Vol.  8,  No.  8, 
p.  116). 

324.  The  portion  of  the  rules  and  regulations  of  the  Deutsche  Bank 
coming  under  this  head  is  reproduced  in  Joh.  Fr.  Schaer,  Die  Bank  im 
Dienste  des  Kaufmanns,  pp.  128  and  129. 

325.  This  is  the  reverse,  quite  compatible  with  the  principles  of  juris- 
prudence, of  the  provision  of  art.  405,  sec.  2  of  the  Commercial    Code, 
which,  it  is  to  be  noted,  is  merely  declaratory  in  its  nature.     It  declares 
that,  when  the  broker  announces  the  execution  of  an  order  without  ex- 
pressly stating  that  he  himself  is  liable  for  it,  this  is  equivalent  to  the 
statement  that  he  has  closed  the  transaction  with  a  third  party  on  account 
of  his  client. 


90311°— ii 54  833 


National    Monetary     Commission 

326.  This  is  self-evident  from  art.  403  of  the  Commercial  Code. 

327.  Until  the  new  Bourse  Law  went  into  effect,  it  was  customary  to 
add  the  following:  "Transactions  relating  to  securities  with  fixed  date  of 
delivery  are  subject  to  special  provisions." 

328.  This  is  an  extension  of  arts.  397  and  369  of  the  Commercial  Code. 

329.  That  is  to  say,  not  merely  "on  account  of  all  demands  on  current 
account  in  the  brokerage  business"  (art   397,  Commercial  Code). 

330.  This  addition  corresponds  to  art.  8  of  the  bank  deposit  law  of  July 
5,  1896,  which  requires  that  the  broker  (local  banker)  who  transmits  for 
safe-keeping  securities,  the  property  of  a  customer,  to  a  central  banker,  or 
transmits  to  such  banker  an  order,  received  from  a  customer,  to  purchase 
securities,  shall  declare  to  the  central  banker  that  the  securities  belong  to  a 
third  party  or  that  the  purchase  is  to  be  made  on  account  of  a  third  party. 
The  consequence  of  this  is  that  the  central  banker  can  exercise  the  right 
of  pledge  and  retention  only  in  virtue  of  claims  that  have  arisen  in  connec- 
tion with  these  securities  (in  particular  as  regards  any  remnant  of  the  pur- 
chase price),  but  not  in  virtue  of  all  claims  which  the  central  banker  has 
against  the  provincial  banker  in  connection  with  any  other  business      The 
latter  was  the  case  before  the  enactment  of  the  Bank  Deposit  Law,  when  the 
provincial  banker  deemed  himself  authorized  to  leave  the  central  banker 
in  ignorance  of  the  fact  that  the  transmitted  papers  belonged  to  a  third 
party  or  that  the  ordered  purchase  was  to  be  made  on  account  of  a  third 
party.     If  thereupon  the  provincial  banker  became  bankrupt,  the  central 
banker  enforced  his  right  of  pledge  or  retention  in  virtue  of  all  his  claims 
on  the  provincial  banker,   with  the  consequence  that  the  client  of  the 
provincial  banker  as  a  rule  found  that  his  right  of  exemption  became 
illusory. 

331.  This  addition,  referring  to  art.  2  of  the  imperial  stamp  law  of  June  3, 
1906,  is  intended  to  exclude  the  joint  liability  of  the  bank  for  the  stamp- 
ing of  the  securities  in  accordance  with  the  law.     In  virtue  of  this  pro- 
vision, while  the  pledging  of  foreign  securities  comes  under  the  definition 
of  a  "business"  (between  living  persons)  liable  to  stamp  dues,  the  same  is 
not  true  of  the  deposit  of  such  securities  made  without  any  right  of  pledge. 
That  is  the  reason  why  the  conditions  provide  that  in  the  case  of  unstamped 
foreign  securities  the  right  of  pledge  and  retention,  which  otherwise  would 
be  created,  is  excluded. 

332.  Arts.  1 22 1  and  1235  of  the  Banking  Code  read  as  follows:  Art.  1221 : 
If  the  pledge  has  a  bourse  or  market  price,  the  holder  of  it  may  sell  it  at 
free  sale  at  the  current  price  through  a  broker  legally  authorized  to  make 
such  sales,  or  through  a  person  authorized  to  make  public  auction  sales. 
Art.  1235:  The  sale  of  the  pledge  is  to  be  made  by  way  of  public  auction. 
If  the  pledge  has  a  bourse  or  market  value,  the  provision  of  art.  1221  applies. 

333.  Art.  1246  of  the  Banking  Code  says    If,  according  to  equity,  the 
interests  of  the  parties  concerned  would  be  better  served  by  a  method  of 
sale  of  the  pledges  different  from  that  provided  in  arts.  1235  to  1240,  either 
of  these  parties  may  demand  that  the  sale  shall  take  place  according  to  this 


834 


e  r  m  a  n     Great     Bank 


JSii 

other  method.     If  an  agreement  is  not  reached,  the  decision  shall  be  made 
by  the  court. 

334.  Concerning  the  meaning  of  the  word  "  ausdrucklich  "  (expressly),  see 
Riesser,  Das  Bankdepotgesetz,  26.  edition  (Berlin,  Otto  Liebmann,  1906), 
p.  49,  note  i,  and  pp.  26  and  27.     Bruno  Buchwald,  on  p.  172  of  his  exceed- 
ingly valuable  book  "Die  Technik  des  Bankbetriebs"    (5th  ed.,   Berlin, 
Julius  Springer,  1909,  p.  172),  reproduces  a  printed  blank  containing  the 
words:  "and  I  confer  on  you  the  rights  provided  in  section  i,  article  2  of 
the  deposit  law  of  July  5,  1869."     It  is  to  be  noted  that  this  blank  is  not 
conformable  to  the  law.     The  law  requires  an  express  authorization,  that  is 
to  say,  the  authorization  itself  must  make  it  clear  that  the  giver  thereof 
was  well  aware  of  its  contents  and  meaning. 

335.  However,  to  guard  against  an  incorrect  practice,  such  as  seems  to 
obtain  in  many  places,  it  must  be  pointed  out  once  more  that,  even  where 
such  authorization  has  been  given  to  the  banker,  he  is  required  to  safeguard 
the  customer's  securities  in  accordance  with  the  provisions  of  art.  2  of  the 
bank  deposit  law  so  long  as  he  has  not  made  use  of  the  authorization  (see 
Riesser,  loc.  cit.,  p.  33  under  b). 

336.  See  Bruno  Buchwald,  loc.  cit.,  pp.  131,  149. 

337.  See  Bruno  Buchwald,  loc.  cit.,  pp.  149,  352. 

338.  See  Rob.  Franz,  Die  deutschen  Banken  im  Jahre  1908,  pp.  24-25. 

339.  See  Ad.  Weber,  Depositenbanken  und  Spekulationsbanken,  p.  102 

340.  See  Rob.  Liefmann,  Beteiligungs-  und  Finanzierungsgesellschaften 
(Jena,  1909,  Gust.  Fischer),  who  justly  insists  that  this  financing  business 
is  to  be  sharply  distinguished  from  the  issue  business  (p.  84  et  seq.).     The 
former  consists  in  procuring  the  funds,  belonging  to  the  bank  or  to  the 
public,  required  for  the  operations  of  transformation  or  original  founding, 
and — I  may  add — in  assuming  the  functions  of  intermediary  in  these  oper- 
ations. 

341.  The  ratio  of  transformations  to  original  foundings  (which  are  com- 
bined in  the  table  of  companies  founded,  see  p.  119),  was  stated  by  van  der 
Borght  for  the  period  1895-1907  at  about  50  per  cent  (Jahrbucher  fur  Na- 
tional-Oekonomie  und  Statistik,  3d  series,  Vol.  XV). 

342.  See  p.  115  and  following  of  the  present  work  for  an  account  of  the 
increase  in  the  capital  of  stock  companies  founded  in  the  four-and-a-half -year 
period  1870-1874,  as  compared  with  the  capital  of  stock  companies  founded 
in  the  period  1851-1870. 

343.  Heinrich  Sattler,  Die  Effektenbanken  (Leipzig,  1890),  p.  21:  "The 
operations  of  transformation  may  be  briefly  designated  as  industrial  job- 
bery (industrielle  Ausschlachtungsgeschdfte)." 

344.  Engel,  in  Zeitschrift  des  Statistischen  Bureaus  (Berlin,  1875),  Heft 

4,  P-  356. 

345.  See  Ad.  Wagner's  preface  to  Heinrich  Sattler' s  scientifically  rather 
unimportant  work,  Die  Effektenbanken  (Leipzig,  C.  F.  Winter' scche  Ver- 
lagshandlung,  1890).     In  that  preface,  Wagner  displays  with  startling  dis- 
tinctness his  attitude  toward  the  credit  banks,  which  afterward  prompted  his 


835 


National    Monetary     Commission 

various  extreme  proposals.  "The  fat  dividends,"  he  says  in  the  preface,  p. 
VIII,  "  may  in  some  cases  havfe  been  earned  by  these  banks  honestly,  but  on 
the  whole  they  owe  their  high  figure  principally  to  the  exploitation  of  the 
heedlessness,  inexperience  and  greed  of  that  portion  of  the  population  which 
engages  in  gambling  at  the  bourse."  (Compare  with  this  statement  the 
sources  of  bank  dividends,  as  stated  in  the  present  work!)  Again:  "Social 
legislation  concerns  ...  all  those  economic  relations  where  there  is  danger  of 
exploitation,  and  where  profits,  incomes,  fortunes,  often  of  gigantic  dimen- 
sions, are  developed  without  corresponding  'labor,'  at  the  expense  of  the 
persons  exploited,  though  the  latter  may  in  many  cases  share  in  the  blame." 

346.  Walther  Lotz,  Die  Technik  des  deutschen  Emissionsgeschafts  (Leip- 
zig, Duncker  &  Humblot,  1890).     A  fundamental  work. 

347.  Art.  41,  sec.  i  of  the  Bourse  law  reads  as  follows:  "The  stock  of  an 
enterprise  transformed  into  a  stock  company  or  into  a  stock  company  en 
commandite  shall  not  be  admitted  to  trade  at  the  Bourse  before  the  expira- 
tion of  one  year  from  the  date  of  the  entry  of  the  name  of  the  company  in 
the  trade  register  and  before  the  publication  of  the  first  annual  balance 
sheet,  with  statement  of  profit  and  loss.     In  special  cases  this  period  may 
be  abridged  or  dispensed  with  by  the  government  of  the  State  (art.  i)." 

348.  According  to  the  table  of  Der  Deutsche  Oekonomist,  reproduced  on 
p.  268  of  Ernst  Loeb's  work,  Die  Berliner  Grossbanken  in  den  Jahren  1895 
bis  1902  etc.,  the  premium  on  newly  issued  stock  in  the  years  1896-1900, 
inclusive,  was  as  follows:  Bank  stock,  35.3,  53.5,  36.7,  30.6,  and  26.5  per 
cent,  industrial  stock,  36.1,  66.7,  67.7,  66.9,  and  55.2  per  cent. 

349.  A  "  bonus"  (Bonification)  is  the  remuneration  paid  to  a  bank  before 
or  at  the  time  of  issue  by  the  party  issuing  securities  solely  for  services  in 
promoting  the  sale  of  the  securities,  that  is  to  say,  a  function  which  has 
absolutely  nothing  to  do  with  the  quality  of  the  bank  as  broker  for  its  clients. 
This  "bonus"  therefore  represents  a  special  remuneration  for  a  special  kind 
of  banking  activity,  consisting  in  this  that  the  banker  undertakes,  to  the  best 
of  his  ability  and  on  the  ground  of  his  special  knowledge  of  customers,  to  see 
that  the  securities  issued  are  placed  in  good  hands,  that  is  to  say,  perma- 
nently.    This  function  should  not  be,  and  in  fact  can  not  be,  performed  by 
any  one  but  a  banker.     Hence  it  is  absurd  to  say  that  he  is  bound  to  pay 
this  bonus  to  his  clients,  that  is  to  say,  the  buyers  of  the  securities,  and  still 
less,  that  he  acts  "fraudulently"  (dolos)  in  failing  to  state  the  fact  that  he 
received  a  bonus  and  to  share  it  with  others,  as  was  decided  by  the  Imperial 
Court  (I  Civil  Senate)  in  a  judgment  rendered  Dec.  10,  1904. 

350.  How  ill-advised  it  is  to  draw  rash  conclusions  in  regard  to  the  man- 
ner of  issue  from  a  temporary  decline  in  quotations,  is  illustrated  by  the 
table  printed  by  Ad.  Weber  (loc.  cit,  p.  155),  in  which  the  list  of  "Stock 
companies  of  inferior  quality"  includes  the  Jura-Simplon  railway,  which 
has  since  then  been  nationalized. 

351.  See  Walther  Lotz,  loc.  cit.,  p.  71. 

352.  The  two  tables  are  reprinted  on  pp.  278  and  279  of  the  proceedings 
of  the  bank  inquiry  commission  of  1908  (Proceedings  of  the  full  commis- 


836 


The     German     Great    Banks 


sion,  Numbers  I-V  of  the  question  sheet,  Berlin,  Ernst  Siegfr.  Mittler  & 
Sohn,  1904),  as  appendix  to  pp.  65  et  seq. 

353.  The  Frankfurter  Zeitung  enumerates  the  bonds  thus:  "German  and 
foreign    mortgage    bank    bonds    (estimated)"    and    "Other    bonds;"    the 
Deutscher  Oekonomist,  on  the  contrary,  discriminates  between  mortgage, 
railway  and  industrial  bonds,  both  in  the  case  of  the  German  and  of  the 
foreign  bonds.     The  Frankfurter  Zeitung  gives  railway  stock  and  tram- 
way stock  in  a  single  item,  while  the  Deutscher  Oekonomist  separates  them. 
The  table  of  the  Frankfurter  Zeitung  lacks  the  item  "  Insurance  stock," 
which  receives  special  notice  in  the  Deutscher  Oekonomist  at  least  in  the 
case  of  German  securities.     The  table  of  the  Frankfurter  Zeitung  contains 
separate  statements  regarding  foreign  securities  only  in  the  case  of  govern- 
ment loans,  while  the  table  of  the  Deutscher  Oekonomist  gives  these  sepa- 
rate statements  throughout.     Finally,  there  are  great  differences   in    the 
amounts.     Thus  for  example  the  nominal  amount  of  the  foreign  govern- 
ment loan  issues  during  1905  given  in  the  table  of  the  Frankfurter  Zeitung 
differs  from  that  given  in  the  Deutscher  Oekonomist  by  not  less  than 
142,000,000  marks    (Frankfurter   Zeitung,   nominal   amount   724,000,000, 
Deutscher  Oekonomist  866,000,000  marks)  in  a  single  group  of  securities. 
In  1907  the  market  value  of  all  issues,  according  to  the  Frankfurter  Zeitung, 
was  in  round  figures  1,842,000,000  marks,  while  according  to  the  Deutscher 
Oekonomist   it   was    2,135,000,000   marks,    again   a   difference   of  nearly 
300,000,000  marks. 

354.  Based  largely  on  Otto  Jeidels,  Das  Verhaltnis  der  deutschen  Gross- 
banken  zur  Industrie,  Leipzig,  Duncker  &  Humblot,  1905. 

355.  Regarding  positions  in  the  supervisory  councils  as  a  "consequence 
of  concentration  in  the  banking  and  particularly  in  the  issuing  business," 
see  Franz  Eulenburg,  Die  Aufsichtsrate  in  den  deutschen  Aktiengesell- 
schaften  (Conrad's  Jahrbiicher,  series  3,  Vol.  XXXII,  Lieferung  i,  pp. 
109  et  seq.). 

356.  Otto  Jeidels,  loc.  cit.,  p.  in. 

357.  Otto  Jeidels,  loc.  cit.,  p.  44. 

358.  Ibid,  p.  51. 

359.  For  example,  in  the  case  of  the  fusion  of  the  Huldschinsky  Smelt- 
ing Works  with  the  Upper  Silesian  Railway  Supply  Co.,  1904. 

360.  Loc.  cit.,  p.  127. 

361.  Loc.  cit.,  p.  55. 

362.  Otto  Jeidels,  loc.  cit.,  p.  139. 

363.  Loc.  cit.,  p.  169,  Tables  I  and  II. 

364.  Loc.  cit.,  pp.  170,  171,  Tables  III  and  IV. 

365.  See  Riesser,  Zur  Aufsichtsratsfrage  (Berlin,  Otto  Liebmann,  1903, 
reprint  from  the  Jubilee  publication  of  the  Juristische  Gesellschaf t  zu  Berlin 
in  honor  of  Richard  Koch),  pp.  296  et  seq. 

366.  Rud.  Eberstadt,  Der  deutsche  Kapitalmarkt  (Leipzig,  Duncker  & 
Humblot,  1901). 


837 


National    Monetary     Commission 

367.  See  Ad.  Weber,  loc.  cit.,  p.   171.     Ruhland,  indeed,  continues  to 
deem  it  appropriate,  without  any  regard  to  the  objections  raised,  to  say 
(Vol.  Ill  of  the  "System  der  Politischen  Oekonomie",   Berlin   1908,   p. 
146):  "According  to  an  investigation  by  Eberstadt,  the  market  value  of 
German  industrial  securities  was  enhanced  by  speculation  during  the  period 
from  January  i,  1895,  to  April  i,  1900,  by  75  to  100  per  cent  above  their 
issue  price." 

368.  Ernst  Loeb,  (loc.,  cit.  p.  271)  assumes  that  one-half  to  three-fourths 
of  the  credits  booked  under  loans  (Debitoren)  were  granted  in  behalf  of 
commerce  and  industry,  a  statement  which  it  would  be  difficult  to  verify. 

369.  In  refutation  of  Eberstadt  see  also  Franz  Eulenburg,  Die  gegen- 
wartige  Wirtschaftskrise,  Symptome  und  Ursachen,  in  Conrad's  Jahrb., 
Ill  series,  Vol.  XXIV,  p.  381;  Heinemann  in  Conrad's  Jahrb.  (1902),  III 
series,  Vol.  XX,  p.  128;  and  Ernst  Loeb,  in  the  Schriften  des  Vereins  fur 
Sozialpolitik,  Vol.  CX  (Die  Storungen  imdeutschen  Wirtschaftsleben,  1903, 
Vol.  VI),  p.  270. 

370.  See  for  instance  the  report  of  the  Darmstadter  Bank  for  1853. 

371.  Page  29. 

372.  Jubilee  report  of  the  Disconto-Gesellschaft,  p.  29. 

373.  Concerning  other  mistakes  made  in  connection  with  the  issue  of 
that  first  war  loan,  see  Riesser,  Finanzielle  Kriegsbereitschaft  und  Kriegs- 
fiihrung  (Jena,  Gustav  Fischer,    1909)  p.   102  et  seq.     Nevertheless  the 
blame  for  this  poor  result  has  until  very  recently  been  laid  not  on  the  finan- 
cial administration,  which  established  those  conditions  against  the  express 
warning  of  the  representatives  of  the  banking  business,  but  on  the  whole 
body  of  German  banks  and  bankers. 

374.  Loc.  cit.,  Bank-Archiv,  Vol.  8,  No.  8  (of  Jan.  15,  1909),  p.  118. 

375.  The  compensation  is  effected  for  the  most  part  by  exports. 

376.  I  greatly  prefer  the  term  "balance  of  claims"  (Forderungsbilariz), 
proposed  by  Sartorius  Freiherr  von  Waltershausen  in  lieu  of  the  term 
''balance  of  payments"   (Zahlungsbilanz),  on  pp.  73  et  seq.  of  his  book 
"  Das  volkswirtschaf tliche  System  der  Kapitalanlage  im  Auslande,"  which 
will  be  discussed  on  a  subsequent  page. 

377-  Jubilee  report  of  the  Disconto-Gesellschaft,  p.  127. 

378.  Bourse  inquiry  commission,  list  of  proposals  rejected  or  withdrawn, 
p.  21. 

379.  Sartorius   Freiherr   von   Waltershausen;    Das   volkswirtschaftliche 
System  der  Kapitalanlage  im  Auslande.     Berlin,  1907,  Georg  Reimer. 

380.  Bank-Archiv  of  Sept.  i,  1908,  Vol.  7,  No.  23,  p.  357. 

381.  The  issues  in  question  were  in  the  main  Argentine,  Greek,  Portu- 
guese, Chilean,  and  Servian  Government  loans,  a  Buenos- Aires  municipal 
loan,  Brazilian,  Dutch-South-African,  and  Mexican  railway  loans,  in  the  issue 
of  which,  in  one  case  or  another,  all  the  great  banks  without  exception, 
together  with  a  number  of  other  banks  and  banking  firms,  took  part  to  a 
greater  or  less  extent.     Certain  of  these  securities  declined  rapidly  almost 
as  soon  as  issued,  which  led  to  sharp  criticisms  of  the  issuing  firms.     See  the 


838 


The     German     Great    Banks 


table  of  the  Deutscher  Oekonomist,  reproduced  by  Ad.  Weber,  loc.  cit,  p. 
132.     This  table,  however,  should  be  used  with  caution. 

382.  Even  Siemens'  calculations  (see  Deutscher  Oekonomist,  Sept.  14, 
1901,  p.  529),  correct  as  they  are,  can  not  be  regarded  as  pertinent  from  the 
point  of  view  here  represented.     A  more  important  circumstance  is  the 
fact  pointed  out  by  Rob.  Liefmann  (Conrad's  Jahrbucher,  series  3,  Vol. 
XXVII,  p.  172),  as  well  as  in  the  present  work,  that  a  large  part  of  the 
issues  of  foreign  loans  is  often  sold  not  in  German  but  in  foreign  markets. 

383.  Ad.  Weber,  loc.  cit.,  p.  134,  note  3. 

384.  The  History,  Principles  and  Practice  of  Banking,  London,  1901,  I, 
p.  64  (see  ibid.,  p.  181). 

385.  Only  one  5  per  cent  Prussian  loan  of  £5,000,000,  included  in  the 
table,  dated  back  as  far  as  1818. 

386.  Ad.  Weber,  Depositenbanken  und  Spekulationsbanken,  p.  132.     In 
contrast  with  these  numerical  data,  taken  from  the  Deutscher  Oekonomist, 
there  is  a  statement,  also  found  in  the  Deutscher  Oekonomist  (July  22,  1899, 
p.  527),  which  puts  the  figure  as  low  as  1,973,000,000,  a  good  deal  less 
than  the  2,417,000,000  mentioned  in  the  text. 

387.  Ad.  Weber,  loc.  cit.,  pp.  128-129.     The  figure  given  for  1900  does  not 
quite  agree  with  the  corresponding  figure  given  by  Ernst  Loeb,  Die  Ber- 
liner Grossbanken  in  den  Jahren  1895  bis  1902,  p.  121,  which  gives  also  the 
real  estate  participations  (Terrainbeteiligungen).     These  are  stated  as  fol- 
lows, from  1897  to  1901:  3,  3,  8,  8,  n. 

388.  Ernst  Loeb,  loc.  cit.,  p.  161. 

389.  For  the  time  being  the  Berliner  Handelsgesellschaft  does  not  pub- 
lish any  summary  balances. 

390.  See  for  example  the  data  from  the  balance  sheets  of  the  Darmstadter 
Bank  for  the  end  of  1899  and  1900,  reproduced  by  Ad.  Weber,  loc.  cit.,  p. 
163. 

391.  See  Ernst  Loeb,  loc.  cit.,  p.  171,  and  for  the  preceding  table,  p.  161. 

392.  No  figures  are  available  for  the  Berliner  Handelsgesellschaft,  since 
this  bank  does  not  yet  publish  any  summary  reports. 

393.  See  Jubilee  report  of  the  Disconto-Gesellschaft,  pp.  29,  33,  and  fol- 
lowing. 

394.  See  Jubilee  report  of  the  Disconto-Gesellschaft,  pp.  84  and  85. 

395.  For  particulars  regarding  the  creation  and  development  of  the  firm 
Ludwig  Loewe  &  Co.,  and  of  the  Loewe  group,  see  Otto  Jeidels,  p.  243  and 
following. 

396.  See  Richard  Rosendorff,  Die  deutschen  Banken  im  uberseeischen 
Verkehr  (in  Schmoller's  Jahrb.,  1904,  Vol.  XXVIII,  No.  4,  pp.  93-134). 

Same  author,  Le  developpement  des  Banques  Allemandes  a  L'Etranger 
(Revue  Economique  Internationale,  T.  I.  Sept.  and  Oct.,  1906).  Same 
author,  Die  Deutschen  Ubersee-Banken  und  ihre  Geschafte  (in  Blatter  fur 
vergleichende  Rechtswissenschaft  und  Volkswirtschaftslehre,  Vol.  Ill,  1908, 
Nos.  7,  8).  J.  Hellauer,  Die  Zahlungsvermittlung  der  englischen  Banken  im 
Uberseehandel.  Vienna,  1904.  Emil  Kerz,  Deutschlands  auslandische 


839 


National    Monetary     Commission 

Banken  (Annalen  des  Deutschen  Reichs,  Vol.  39,  1906,  No.  i,  p.  48  and  fol- 
lowing). R.  Hauser,  Die  deutschen  Ubersee-Banken  (Jena,  1906).  Anton 
Paul  Briining,  Die  Entwicklung  des  auslandischen,  speciell  des  iiberseeischen 
deutschen  Bankwesens  (Berlin,  1907,  Puttkammer  &  Miihlbrecht).  Andre 
E.  Sayous,  Les  Banques  Allemandes  et  le  Commerce  d'outremer,  in  Bul- 
letin Mensuel  de  la  Federation  des  Industriels  et  des  Commercants  Francais, 
5th  year,  No.  52  (January,  1908,  Part  I).  Same  author,  ibid.,  No.  70,  July, 
1909,  p.  404  and  following) :  Pourquoi  et  comment  il  faut  former  en  France 
des  Banques  d'exportation.  L'exemple  des  banques  allemandes  d'outre- 
mer. Georges  Diouritch,  L'expansion  des  Banques  Allemandes  a  I/Etran- 
ger,  Ses  Rapports  avec  le  DeVeloppement  ficonomique  de  1'Allemange 
(Paris,  1909,  Arthur  Rousseau). 

397.  An  appreciation  has  been  attempted  in  my  obituary  on  the  occasion 
of  the  untimely  death  of  Dr.  George  v.  Siemens,  the  gifted  and  lamented 
president  of  the  Deutsche  Bank  (Bank-Archiv.,  ist  year,  No.  2,  Nov.,  1901). 

398.  For  a  discussion  of  the  manner  in  which  banks  had  to  intervene  and 
did  intervene  on  behalf  both  of  importers  and  exporters,  see,  among  others, 
Richard    Rosendorff,    Die  deutschen   Banken   im   iiberseeischen  Verkehr 
(Schmoller's  Jahrbuch  fur  Gesetzgebung,  etc.,  Vol.  XXVIII,  No.  14,  pp. 
93-J34)>  also  p.  426  and  following  of  this  volume. 

399.  See  Report  of  the  Deutsche  Bank  for  1871,  p.  3. 

400.  See  Report  of  the  Deutsche  Bank  for  1871,  p.  4. 

401.  The  following  citations  are  taken  from  Model,  loc.  cit.,  pp.  107,  109, 
and  117.     The  above  remarks  are  not  intended  as  a  reproach  to  the  news- 
paper in  question ;  but  the  sentiments  prevailing  at  that  time  in  banking 
and  bourse  quarters,  and  which  are  merely  found  reflected  in  that  paper, 
are  of  more  than  purely  historical  interest. 

402.  Emil  Herz,  loc.  cit.,  No.  i,  p.  48  et  seq. 

403.  The  German  oversea  banks  engaged  in  this  line  of  business  (the 
so-called  "Inkassogeschaft,"  i.  e.  the  collection  of  bills,  bills  of  lading, 
etc.)    have   special    so-called    "  Inkasso    tariffs "     See,    for   instance,    the 
Inkasso  tariff  of  the  Deutsche  Orient  bank  reproduced  by  Rich.  Rosen- 
dorff,   Die  deutschen   Ueberseebanken   und  ihre  Geschafte,    reprint,    pt. 
24-46. 

404.  See   Waldemar   Miiller,  Die   Organisation   des    Kredit-  und   Zah- 
lungsverkehrs  in  Deutschland,  Bank-Archiv,  vol.  8,  p.  115  et  seq. 

405.  In  case  of  the  so-called   "option  shipments,"   by   the   terms   of 
which  the  article  may  be  offered  for  sale  at  different  places  during  trans- 
portation, "option  bills  of  lading"  are  given. 

406.  Waldemar  Miiller,  loc.  cit.,  p.  116. 

407.  Thus,  for  instance,  the  banks,  for  the  purpose  of  securing  their 
advances,  cause  both  the  sender  and  consignee  to  sign  declarations,  accord- 
ing to  which  the  goods  and  their  proceeds  remain  hypothecated  with  the 
bank,  not  only  so  long  as  the  documents  are  in  the  hands  of  the  bank, 
but  also  subsequently,  so  that  the  consignee  obligates  himself  to  hold  at 
the  disposal  of  the  bank  the  documents  or  the  goods  themselves  (if  deliv- 


840 


The     German     Great    B 


a  n 


ered  to  him),  to  keep  separate  accounts  regarding  the  goods  and  their 
proceeds,  not  to  merge  the  proceeds  with  other  receipts  and  assets,  and  to 
deliver  these  proceeds  to  the  bank  at  the  earliest  possible  opportunity, 
(letter  of  hypothecation).  The  person  who  receives  the  goods,  when 
informed  of  these  stipulations  through  the  bank  by  the  grantee  of  the 
advance  must  make  a  corresponding  declaration  (letter  of  lien),  and  it  is 
only  after  such  a  declaration  and  the  giving  of  the  acceptance  that  he 
receives  the  documents 

408.  Waldemar  Muller,  Bank-Archiv,  vol.  8,  No.  8  (Jan  15,  1909),  p.  115. 

409.  For   particulars   regarding   the   charter   of   the   Deutsche    Ueber- 
seeische    Bank,    commercial    and    railroad   conditions   in    Argentina,  the 
achievements  of  the  various  branches  of  the  bank,  the  turnover  and  the 
results  attained  by  these  branches  see  Ant.  Paul  Briining,  p.  45-80,  and 
Georges  Diouritch,  loc.  cit.,  pp.  497-549. 

410.  We  frequently  come  across  the  erroneous  view,  adopted  to  some 
extent  in  the  literature  of  the  subject,  (see  for  instance  Georges  Diouritch, 
loc.  cit.,  p.  501),  that,  under  the  Argentine  laws  of  that  time,  the  increase  of 
capital  of  the  old  bank  (the  Deutsche  Ueberseebank),  which  was  intended 
in  1891  because  of  the  large  growth  of  the  business  of  the  bank,  could  be 
affected  only  after  its  liquidation  and  the  organization  of  a  new  bank,  which 
was  take  over  the  assets  and  liabilities  of  its  predecessor      As  a  matter 
of  fact,  the  old  bank,  too,  was  a  German  corporation,  so  that  an  increase 
of  capital  would  have  had  to  be  effected  in  accordance  with  German  and 
not  with  Argentine  laws.     The  true  cause,  evidently,  was  that  for  various 
reasons  it  was  desired  to  endow  the  bank  with  a  large  capital.     According 
to  German  law  this  could  only  be  done  by  fully  paying  up  the  capital  of 
the  old  bank,  which  the  managers  were  not  willing  to  do,  preferring  to 
found  a  new  institution  with  a  larger  capital,  of  which  for  the  time  being 
only  a  part  had  to  be  paid  up 

411.  Ad  (b)  and  (c)  see  Anton  Paul  Briining,  pp.  14,  15. 

412.  Report  of  the  Deutsche  Bank  for  1892,  p.  4. 

413.  Report  of  the  Deutsche  Bank  for  1890,  p.  4. 

414.  Report  of  the  Deutsche  Bank  for  1872,  p.  4. 

415.  Report  for  1883,  p.  n. 

416.  Report  for  1883,  pp.  3,  n. 

417.  For  particulars  see  Rich.  Rosendorff,  Treuhandgesellschaften  und 
ihre  Funktionen,  in  Conrad's  Jahrbiicher,   1906,  No.  5,  pp.  608  et  seq.; 
also  Walter  Nachod,  Treuhander  und  Treuhandgesellschaften  (Tubingen 
1908,  H.  Laub'sche  Buchhandlung)  pp.  88  et  seq. 

418.  Report  of  the  Deutsche  Bank  for  1892,  p.  4. 

419.  Report  of  the  Deutsche  Bank  for  1901,  p.  5. 

420.  Report  of  the  Deutsche  Bank  for  1903,  p.  7. 

421.  Report  of  the  Deutsche  Bank  for  1908,  p.  8. 

422.  Report  of  the  Deutsche  Bank  for  1873,  p.  10. 

423.  Report  of  the  Deutsche  Bank  for  1883,  p.  1 1. 

424.  Report  of  the  Deutsche  Bank  for  1895,  p.  4. 


841 


National    Monetary     Commission 

425.  Report  of  the  Disconto-Gesellschaft  for  1887,  p.  5.     For  particulars 
regarding  balance  sheets  of  the  Brasilianische  Bank  fiir  Deutschland  for  the 
years  1889  to  1905  see  Rich.  Rosendorff,  Le  developpementetc.  p.  42  and  -43, 
also  Georges  Diouritch,  loc.  cit,  pp.  550-598. 

426.  Report  for  1889,  p.  9. 

427.  Report  for  1890,  p.  8,  and  1900,  p.  13. 

428.  For  particulars  regarding  the  balance  sheets  of  the  Bank  fiir  Chile 
und  Deutschland  for  the  years  1896-1904  see  Rich.  Rosendorff,  Le  develop- 
pement  etc.  (Oct.,  1906)  pp.  44,  45  and  Georges  Diouritch,  pp.  599-621. 

429.  Rosendorff 's  statement,  loc.  cit.,  p.  33,  that  the  bank  was  founded  in 
1892,  is  a  misprint. 

430.  For  particulars  regarding  the  activity  of  the  bank,  see,  among  others 
Georges  Diouritch,  loc.  cit.,  p.  684-690. 

431.  Report  of  the  Disconto-Gesellschaft  for  1900,  p.  10,  and  1905,  pp. 

13-15- 

432.  Report  of  the  Disconto-Gesellschaft  for  1888,  p.  8. 

433.  Report  of  the  Dresdner  Bank  for  1905,  p.  6. 

434.  Report  of  the  Dresdner  Bank  for  1905,  p.  6. 

435.  Report  for  1905,  p.  6.     The  Dresdner  Bank  on  that  occasion  noted 
that  it  would  during  the  coming  years  regard  it  as  one  of  its  principal  tasks 
"to  enlarge  and  properly  develop  the  foreign  business  relations,  especially 
in  oversea  lands  with  which  Germany  has  active  trade  connections. " 

436.  Report  of  the  Darmstadter  Bank  for  1885,  p.  16.         . 

437.  Report  of  the  Darmstadter  Bank  for  1871,  p.  2. 

438.  Report  for  1873,  p.  16. 

439.  See  Anton  Paul  Briining,  pp.  32,  33. 

440.  Report  of  the  Berliner  Handelsgesellschaft  for  1887,  p.  8. 

441.  Report  for  1889,  p.  n. 

442.  Report  for  1903,  p.  10. 

443.  For  particulars  see,  among  others,  Georges  Diouritch,  p.  624. 

444.  The  absolute  amounts  in  the  balance  sheets  of  the  Deutsch-Asiatische 
Bank  from  1891  to  1904  are  given  by  Rich.  Rosendorff,  Le  Developpement 
des  Banques  Allemandes  a  1'Etranger,  pp.  38,  39.     For  further  particulars 
see  Georges  Diouritch,  pp.  669-690. 

445.  For  particulars  see  Georges  Diouritch,  pp.  669-677. 

446.  For  particulars  see  Georges  Diouritch,  pp.  738-753. 

447.  See  Rich.    Rosendorff,    Neuordnung  des  Deutsch-Ostafrikanischen 
Miinzwesens,  in  Finanz-Archiv  of  Schanz,  Vol.  XXII,  No.  i,  and  Schmol- 
ier's  Jahrbuch,  Vol.  XXX,  No.  2,  p.  170. 

448.  See  art.  8  of  the  charter  (Appendix  i  to  the  Deutscher  Reichs-und 
Koniglich  Preussischer  Staatsanzeiger,  Mar.  3,  1905,  No.  54).     Furthermore 
the  bank  is  obliged,  according  to  article  13  of  the  charter,  to  publish  a  state- 
ment of  its  assets  and  liabilities  on  the  last  of  every  month,  at  its  own  cost, 
in  a  periodial  designated  by  the  governor  of  the  German  East  African 
protectorate. 

449.  For  particulars  see  Georges  Diouritch,  loc.  cit.,  pp.  754-760. 


842 


The     German     Great    B 


a  n 


450.  Nevertheless,  according  to  art.  42  of  its  charter,  published  in  Appen- 
dix i  of  the  Deutscher  Reichs-  und  Koniglich  Preussischer  Staatsanzeiger, 
February  i,  1905,  No.  28,  it  is  obliged  to  publish  a  statement  of  its  assets 
and  liabilities  on  the  last  of  every  month,  at  its  own  cost,  in  the  Reichsan- 
zeiger,  according  to  a  schedule  prescribed  in  art.  42,  sec.  2. 

451.  Memorial   of   the  imperial   Admiralty  on  "Die   Entwicklung   der 
deutschen  See-Interessen  im  letzten  Jahrzehnt,"  Dec.   1905,  p.   175.     In 
regard  to  France,  see  Rich.  Rosendorff,  Die  franzosischen  Kolonialbanken 
(Bank-Archiv,  1904,  Vol.  3,  No.  10,  pp.  172-174).     In  regard  to  the  several 
British  colonial  and  foreign  banks,  as  well  as  the  several  French  and  Dutch 
colonial  banks,  with  their  branches,  capital  and  dividends,  see  Rich.  Rosen- 
dorff, Le  Developpement  etc.,  pp.  49-51,  and  Diouritch,  loc.  cit.,  appendix 
to  p.  283. 

452.  See  Deutscher  Oekonomist,  No.  1127,  436;  No.  1179,  p.  415;  and 
Rob.  Franz,  Die  deutschen  Banken  im  Jahre  1908,  p.  18. 

453.  See  Robert  Franz,  Die  deutschen  Banken  im  Jahre,  1906  (p.  14), 
im  Jahre  1907  (p.  21),  and  im  Jahre  1908  (p.  26). 

454.  E.  Wagon,    Die    finanzielle    Entwicklung    deutscher    Aktiengesell- 
schaften  von  1870-1900  (Jena,  1903,  Gustav  Fischer),  p.  46. 

455.  See  Vierteljahrshefte  zur  Statistik  des  Deutschen  Reichs,  Ergan- 
zungsheft  zu  1909,  II:  Die  Geschaftsergebnisse  der  deutschen  Aktiengesell- 
schaften  im  Jahre,  1907,  1908,  pp.  15,  16.     Concerning  the  methods  of  cal- 
culation, see  E.  Moll,  Die  Rentabilitat  der  Aktiengesellschaften  (Jena,  1908, 
Gustav  Fischer). 

456.  Including,  in  addition  to  the  6  great  banks,  the  following:  National- 
bank   fur   Deutschland,    Commerz-   und    Disconto-Bank,    Mitteldeutsche 
Kreditbank,    Bank    des    Berliner    Kassenvereins,    Berliner   Maklerverein, 
Amerika-Bank,    Deutsch-Ueberseeische   Bank,    and    Deutsche   Treuhand- 
Gesellschaft.     Beginning  with  1909,  the  Deutscher  Oekonomist  no  longer 
enumerates  the  five  last-mentioned  institutions  among  the  "Berlin  Banks" 
(Deutscher  Oekonomist,   Aug.  28,  1909,  Vol.  XXVII,  No.  1391,  p.  529),  a 
commendable  change,  since  these  institutions  are  managed  on  a  totally  dif- 
ferent basis. 

457.  Rud.  Steinbach,  Die  Verwaltungskosten  der  Berliner  Grossbanken 
(Schmoller's  Jahrbuch,  Vol.  29,  No.  2,  p.  85). 

458.  In  conformity  with  the  new  and  correct  practice  of  the  Deutscher 
Oekonomist,  only  the  nine  credit  banks  properly  so  called  are  here  included. 

459.  Of  April  3,  1904,  reprinted  by  Otto  Jeidels,  loc.  cit.,  p.  129. 

460.  In  1908  the  gross  profits  from  interest,  bills  and  commissions  have 
been  combined. 

461.  On   this  point   see   Rud.   Steinbach,    Die  Verwaltungskosten   der 
Berliner.  Grossbanken  (Schmoller's  Jahrbuch,  Vol.  29,  No.  2,  pp.  71-110, 
and  No.  3,  pp.   141-179):  Ad.  Weber,  loc.  cit.,  p.  213;  Heinemann,  Die 
Berliner  Grossbanken  an  der   Wende  des  Jahrhunderts   (Conrad's  Jahr- 
bucher,  series  III,  Vol.  XX,  p.  86  et  seq.);  Frankfurter  Zeitung,  No.  91, 
April  i,  1903,  and  No.  93,  April  3,  1903  (  ' Betriebskosten  der  Banken"); 


843 


National    Monetary     Commission 

Deutscher  Oekonomist,  Aug.  2,  1902;  Rob.  Franz,  Die  deutschen  Banken 
im  Jahre  1907,  p.  18,  and  im  Jahre  1908,  p.  25.  If  all  the  banks  were 
included,  the  proportion  of  operating  expenses  to  gross  profits  would  be  still 
more  unfavorable,  since  the  above  figures  of  the  Deutscher  Oekonomist  do 
not  include  the  directors'  fees  (Tantiemen),  which  though  constituting 
part  of  the  cost  of  operation  are  enumerated  separately. 

462.  In  1907  and  1908,  reserves  and  amounts  written  off  are  combined. 

463.  Ed.  Wagon,  loc.  cit.,  p.  146. 

464.  These  words  are  found  in  my  opening  address  as  chairman  of  the 
First  General  Congress  of  German  Bankers,  in  Frankfort-on-the-Main  (See 
transactions  of  the  Congress  of  Sept.   19  and  20,   1902,  published  by  the 
Centralverband  des  Deutschen  Bank-  und  Bankiergewerbes,  Berlin,  1902, 
p.  2). 

465.  Compare  Otto  Jeidels,  loc.  cit.,  p.  105.  • 

466.  It  is  to  be  noted  that  the  surplus  is  here  calculated  not  as  per  Decem- 
ber 31  of  the  year  given  but  as  per  Jan.  2  of  the  year  following. 

467.  Jubilaumsbericht  der  Disconto-Gesellschaft,  p.  172. 

468.  Compare  Ernst  Loeb,  Supplement  to  Model,  loc.  cit.,  p.  152. 

469.  See  Otto  Jeidels,  loc.  cit.,  pp.  114-117. 

470.  See  Model,  loc.  cit.,  p.  58. 

471.  Jubilaumsdenkschrift  der  Disconto-Gesellschaft,  pp.  204-205. 

472.  "The  bank  is  authorized  to  conduct  all  kinds  of  banking  business, 
and  therefore  to  conduct  business  of  such  nature  that  it  can  withdraw  its 
money  from  that  business  at  any  time  it  may  be  needful." 

473.  For  some  unaccountable  reason,  Model,  in  his  work  "Die  grossen 
Berliner  Effektenbanken "  (1896)  failed  to  mention  the  A.  Schaaffhausen'- 
scher  Bankverein,  although  it  ranked  even  then  among  the  great  Effekten- 
banken, and,  having  established  its  Berlin  branch  in  1891,  might  properly 
be  numbered  among  the  Berlin  great  banks. 

474.  Compare  Otto  Jeidels,  loc.  cit.,  p.  113. 

475.  See  Otto  Jeidels,  loc.  cit.,  pp.  112,  123. 

476.  Ibid.,  p.  210. 

477.  See  Otto  Jeidels,  loc.  cit.,  p.  137. 

478.  For  the  following  discussion  See  Model,  loc.  cit.,  p.  91  et  seq. 

479.  Report  of  the  Berliner  Handelgesellschaft  for  1878,  p.  2. 

480.  See  A.  Sartorius  Freiherr  von  Waltershausen,  Das  volkwirtschaft- 
liche  System  der  Kapitalanlagen  im  Auslande,  Berlin,  Georg  Reimer,  1907. 

481.  During  the  first  period  the  Darmstadter  Bank,  as  we  learned  above 
(p.  49),  included  in  its  program  the  creation  of  agencies  both  at  home  and 
abroad,  whose  purpose  was  to  be  to  foster  exportation  and  the  innumerable 
relations  between  German  industry  and  the  money  market.     But  for  this 
the  time  was  not  yet  ripe  (partly  because  of  the  scarcity  of  German  capital 
at  that  period),  and  thus  the  Darmstadter  Bank  had  soon  to  abandon  its 
ambitious  plans  (see  p.  60  above  and  note  82  on  p.  798)  just  as  the  Deutsche 
Bank  had  for  a  while  to  give  up  its  East  Asiatic  agencies  opened  soon  after 
its  foundation. 


844 


The     German     Great    Banks 


482.  Otto  Jeidels  must  have  overlooked  the  close  connection  between 
this  phase  of  banking  and  the  so-called  "export  industrialism"  or,  at  least, 
he  did  not  attach  sufficient  importance  to  it,  when  in  his  excellent  book 
on  the  "  Relation  between  the  great  banks  of  Germany  to  industry"  (p.  270), 
he  deplores  the  "lack  on  the  part  of  the  banks,  of  a  general  industrial 
policy  serving  the  economic  interests  of  the  nation  as  a  whole,"  and  con- 
tends (p.  197)  that  with  the  further  evolution  of  capitalism  the  banks  are 
driven  "to  exert  their  activity  abroad,"  by  the  growing  necessity  to  find 
opportunities  for  profitable  investment  in  foreign  countries  for  unemployed 
German  capital.     This  argument,  while  possessing  a  certain  weight,  is  not 
decisive. 

483.  The  exports  by  sea  constitute  a  large  share  of  the  total  exports, 
amounting  in  the  same  year,  according  to  the  special  report  of  the  Ad- 
miralty (introduction  p.  v),  to  64  per  cent  of  the  total  exports. 

484.  According  to  the  report  of  the  imperial  Admiralty  of  Dec.    1905 
on  the  "Development  of  the  German  marine  interests  in  the  last  decade" 
(introduction,  p.  v),  of  the  total  imports  in   1904  almost   73.9   per  cent 
arrived  by  sea. 

485.  See  Paul  Voigt,  loc.  cit.,  p.  273. 

486.  In  the  middle  of  the  last  century,  as  stated  above  (p.  44),  industry 
was  called  upon  to  provide  sustenance  and  employment  for  the  rapidly 
increasing  population  which  could  no  longer  be  supported  by  agriculture 
alone. 

487.  The  expression  "feeding  countries"   (Nahrungsstaateri)  is  too  nar- 
row, because  we  are  dependent  upon  foreign  countries  for  other  things 
besides  food-stuffs. 

488.  Thus  von  Halle's  description  (loc.  cit.,  p.  70),  "Earnings  of  German 
capitalists  from  foreign  securities  and  loans,  bought  and  sold  in  Germany" 
is  too  narrow. 

489.  Paul    Dehn,    Weltwirtschaftliche   Neubildungen    (Berlin,    Allgem. 
Verein  fur  deutsche  Literatur,  1904,  p.  41). 

490.  See  Journal  officiel  de  la  Republique  Francaise,   XXIVe  annee, 
Sept.  25,  1902,  and  the  oft-mentioned  Denkschrift  des  Reichsmarineamts 
of  December  1905,  pp.  188-222. 

491.  Loc.  cit.,  p.  247. 

492.  Das   Geld  im   russisch-japanischen    Kriege   (Berlin,    Ernst   Siegfr. 
Mittler  &  Sohn,  1906),  p.  217. 

493.  See  the  very  instructive  report  of  Leon  Say  to  the  French  National 
Assembly,  made  on  Aug.  5,  1874,  translated  in  the  publication  of  the  Cen- 
tral verband  des  Deutschen  Bank-  und  Bankiergewerbes:  "The  payment  of 
the  French  war  indemnity  of   1870—71   in  Strassburg,    Alsace"    (Berlin, 
J.  Guttentag,  1906,  p.  83). 

494.  See  report  of  the  Reichsmarineamt  of  Dec.  1905,  introduction,  p. 

XI. 

495.  For  particulars  regarding  the  foreign  business  of  German  private 
insurance  companies,  see  the  report  just  mentioned,  pp.  179-187. 


845 


National    Monetary     Commit  sio 


n 


496.  Report  of  the  Reichsmarineamt  of  December  1905,  p.  171,  note  i. 

497.  2d  ed.,  pt.  II,  No.  3,  sec.   13:  Daten  zur  Handelsbilanz  (Vienna, 
1904),  p.  780,  note  2. 

498.  The  total  amount  of  Austro-Hungarian  gold  claims  against  foreign 
countries  was  estimated  by  the  Neue  Freie  Presse  of  Mar.  29,   1903,  at 
400,000,000  crowns. 

499.  The  estimates  of  income  from  these  freight  receipts  differ  greatly. 
According  to  estimates  of  von  Halle  (loc.  cit.,  p.  201),  based  upon  Wor- 
mann's  calculations,  it  amounted  in  1897  to  200,000,000  marks  annually, 
and   would   therefore   amount   at   present   to   about   300,000,000   marks. 
Rud.  Arnold  (Die  Handelsbilanz  Deutschlands,  Berlin,  1905,  Franz  Siemen- 
roth,  p.  185)  estimates  it  at  a  much  lower  figure.     W.  Lotz  (Einiges  iiber 
den  Ausgleich  von  Soil  und  Haben  in  Weltverkehr,  Bank-Archiv,  Vol.  i, 
No.  6,  p.  93)  on  the  other  hand  also  estimates  the  German  freight  receipts 
from  oversea  shipping  at  200,000,000  to  300,000,000  marks.     The  freight 
receipts  of  the  British  merchant  marine  from  its  oversea  trade  alone  are 
estimated  at  1,800,000,000  marks  annually.     (Grunzel,  System  der  Handels- 
politik,  1901,  p.  584.) 

500.  Ad.  Soetbeer,  Bemerkungen  iiber  die  Handelsbilanz  Deutschlands 
(in  Hirth's  Annalen,  Vol.  75,  p.  731  et  seq.).     This  is  probably  the  work  in 
which  the  expression  Zahlungsbilanz  (balance  of  payments)  was  first  used 
(No.  8,  p.  735)  in  contradistinction  to  Handelsbilanz  (balance  of  trade). 

501.  Compare  with  the  above  the  report  by  Ignatz  Gruber,  (Vienna)  on 
statistics   of   the  international   balance   of   payments,    presented    to   the 
International    Statistical    Institute    (loth    session,    London,    July    31    to 
Aug.  15,  1905). 

502.  See  Riesser,   Finanzielle    Kriegsbereitschaft    und    Kriegsfuhrung, 
p.  2  et  seq. 

503.  Die  deutsche  Volkswirtschaft  im  19  Jahrhundert,  2d  ed.,  p.   184. 
The  amount  of  Russian  State  securities  (including  railway  securities  guar- 
anteed by  the  state)  disposed  of  in  France  is  estimated  at  10,000,000,000  to 
13,000,000,000  francs. 

504.  The  table  compiled  by  Rud.  Arnold  on  pages  169-171  of  his  book 
"Die  Handelsbilanz  Deutschlands  von    1889-1900"    (Berlin,   Franz  Sie- 
menroth,    1905)    is   entirely"  incomplete,    as   he   himself    admits.     Large 
additions  may  be  made  to  it  from  the  data  contained  in  the  book  of  Axel 
Preyer  "  Uberseeische  Aktiengesellschaften  und  Grossbetriebe"    (Leipzig, 
Th."  Grieben's  Verlag,    1905),  which,  however,  does  not  relate  solely  to 
German  undertakings  and  excludes  small  enterprises. 

505.  2ded.,  part  2,  No.  3,  sec.  13:  "Data  on  the  balance  of  payment," 
(Tables  224-458).     Vienna,  K.  K.  Hof-  und  Staatsdriickerei,  1904. 

506.  This  chapter  is  a  summary  of  the  views  which  I  advocated  as  a 
member  of  the  bank  bill  commission  of  1908  and  at  the  examination  of 
experts. 


846 


The     German     Great     Banks 


5060.  See  Otto  Warschauer,  "  Das  Depositenbankwesen  in  Deutschland, 
mit  besonderer  Beriicksichtigung  der  Spareinlagen "  (Conrads  "Jahrb." 
Third  series,  Vol.  XXVII,  p.  433-487). 

507.  Caesar  Straus,  "Unser  Depositengeldersystem  und  seine  Gefahren," 
(Frankfort-on-the-Main,  Carl  Jiigel,  1892). 

508.  Loc.  cit.,  p.  17. 

509.  Loc.  cit.,  p.  26. 

510.  Loc.  cit.,  pp.  38-39. 

511.  Otto  Warschauer,  "Das  Depositenbankwesen  in  Deutschland,"  in 
Conrads'  Jahrbiicher,"  third  series,  Vol.  27  (1904),  p.  473  et  seq.,  477,  481. 

512.  Loc.  cit.,  pp.  480-481. 

513.  Loc.  cit.,  p.  482. 

514.  Otto  Warschauer,  pp.  483-484. 

515.  With  unlimited  liability.     According  to  Warschauer,  credit  corpora- 
tions with  limited  liability  should  be  forbidden  to  accept  deposits  (loc. 
cit.,  p.  484). 

516.  See  resolution  of  Count  von  Arnim  in  the  Bourse  act  commission 
of  Mar.   10,   1896,  the  text  of  which  has  been  reproduced  by  Ad.  Weber 
loc.  cit.,  p.  259-60  and  by  others-.     According  to  that  resolution,  regula- 
tions are  to  be  issued  by  which  banks  and  business  people  engaged  solely 
in  the  deposit  business  are  to  be  prohibited  from  engaging  in  contango, 
speculative,  founding  and  issuing  business  (except  trust-fund  issues)  as 
well  as  from  participating  in  such  business  and  in  any  issues  not  expressly 
permitted.     They    are   moreover    to   be   compelled    to    publish    monthly 
summary  statements,   the  form  of  which — set  forth  in  the  resolution — 
is  to  be  legally  prescribed. 

517.  See,  among  others,  Otto  Warschauer,  loc.  cit.,  p.  486  (Bill  No.  3). 

518.  C.  Heiligenstadt,  "Der  Deutsche  Geldmarkt,"  in  Schmoller's  Jahrb. 
Vol.  31,  No.  4,  p.  98. 

519.  Loc.  cit,  p.  98,  X. 

520.  Loc.  cit.,  p.  99. 

521.  Reprinted  in  " Handel  und  Gewerbe,"  Mar.  24,  1906,  i2thyear,  No.  24, 
p.  470,  and  elsewhere. 

522.  Edgar  Jaffe,   in  Transactions  of  the  Third  General  Congress  of 
German  Bankers  (Allgemeiner  Deutscher  Bankiertag),  p.  99. 

523.  In  such  cases  the  bank  usually  assists  only  the  stock  brokers,  not 
the  joint  stock  banks  themselves. 

524.  Ed.  Jaffe,  "Das  Englische  Bankwesen,"  p.  204,  note  i. 

525.  Ed.  Jaffe,  in  Transactions  of  the  Third  General  Congress  of  German 
Bankers  (Allgemeiner  Deutscher  Bankiertag),  p.  99. 

526.  Caesar  Straus,  loc.  cit.,  p.  31. 

527.  Loc.  cit.,  p.  99. 

528.  According  to  J.  W.  Gilbart,  "The  History,  Principles  and  Practice 
of   Banking,"  ed.  1901,  London,  I,  p.  310,  311,  et  seq.;  II,  p.  342,  361,  et 
seq. 


847 


National    Monetary     Commission 

529.  See  second  (German)  edition  of  this  book,  pp.  12-14  (foot-note). 
Thus  for  instance  during  the  crisis  of  1857  the  first  banks  to  fail  were  the 
Borough  Bank  of  Liverpool  with  liabilities  of  £1,200,000,   the  Western 
Bank  of  Scotland,  which  only  a  year  before  had  paid  a  9  per  cent  dividend 
and  which  had  101  branch  offices.     The  last-named  bank  had  advanced 
£1,603,000  to  four  firms  which  became  insolvent,  although  its  total  capital 
only  amounted  to  £1,500,000;  furthermore,  an  item  of  £260,000  figured  in 
its  published  balance  sheets  as  good  assets,  which  the  managers  themselves 
(according  to  notes  discovered)  had  marked  as  irrecoverable.     The  Derwent 
Iron  Co.  alone  owed  the  bank  no  less  than  £750,000  and  had  deposited  as 
"security"  (in  addition  to  a  land  mortgage)  £250,000  of  its  own  deben- 
tures, which  were  nothing  more  than  notes  of  the  directors  forming  the 
company.     None  of  these  facts,  of  course,  could  be  ascertained  from  the 
published  statements.     In  1858  occurred,  among  others,  the  failure  of  the 
Northumberland  and  Durham  District"  Bank  of  Newcastle  with  £1,256,000 
deposits  just  after  it  declared  a  7  per  cent  dividend  at  the  semiannual 
meeting  of  its  shareholders;    the  directors  pleading  that,  since  so  many  of 
the  shareholders  lived  on  their  dividends,  they  had  not  the  heart  "  to  face 
the  shareholders  without  paying  a  dividend!" 

In  1864  no  less  than  27  joint  stock  banks  failed,  and  another  large 
number  followed  in  1866,  including  the  Joint  Stock  Discount  Co.,  the 
Barneds  Bank  of  Liverpool  with  liabilities  amounting  to  £3,500,000,  the 
Bank  of  London,  the  Consolidated  Bank,  the  Agrar  and  Mattermans 
Bank,  the  English  Joint  Stock  Bank,  the  Imperial  Mercantile  Credit  Co., 
the  European  Bank,  etc.,  etc. 

In  the  crisis  of  1878  the  City  of  Glasgow  Bank  was  the  first  of  the  deposit 
banks  to  fail;  it  had  lent  £4,000,000  to  4  firms,  and  had  published  false 
balance  sheets  in  1877. 

A  series  of  other  banks  followed.  Compare  O.  Glauert,  "  Depositenbil- 
dung  in  England  u.  in  Deutschland"  (Conrad's  Jahrb.  3rd  series,  Vol.  VII, 
p.  808):  "From  1814  to  1816,  240  agricultural  banks  suspended  payment, 
and  70  within  the  first  six  weeks  of  1826."  See  also  Edgar  Jaffe,  loc.  cit., 
pp.  196-197. 

According  to  Karl  Mamroth,  "  Die  schottischen  Banken,"  (Conrad's 
Jahrb.,  3rd  series,  Vol.  XXIV,  No.  i,  p.  43,  note  139)  n  banks  of  issue 
failed  in  Scotland  between  1804  and  1842. 

530.  Edgar  Jaffe,  "Das  englische  Bankwesen,"  pp.  204-205,  and  p.  202. 

531.  Loc.  cit,  pp.  204,  205. 

532.  In  England  this  "doctoring"  of  the  balance  sheets  is  called  "window 
dressing."     Edgar  Jaffe,  loc.  cit.,  p.  205. 

533.  Edgar  Jaffe   in   Transactions  of   the  Third   General   Congress  of 
German  Bankers  (Allgemeiner  Deutscher  Bankiertag),  p.  96.     Ad.  Weber, 
loc.  cit.,  p.  231.     The  reserve  funds  alone  of  all  the  82  English  deposit 
banks  amounted  to  about  £31,000,000  =  68  per  cent  of  the  paid-up  capital, 
but  only  about  4.%  per  cent  of  their  liabilities. 


848 


The     German     Great     Banks 


534.  The  published  balance  sheets  of  the  13,912  cooperative  societies 
connected  with  the  Prussian  Central  Cooperative  Society  (Preussische  Central 
Genossenschaftskasse]  showed  that  at  the  end  of   1905  their  own  resources 
amounted  to  54,625,382  marks,  the  deposits  to  758,514,000  marks.     The 
proportion  consequently  was  93:7,  i.  e.,  the  deposits  were  about  thirteen 
times  as  much  as  their  own  means.     For  1,002  cooperative  societies  with 
limited  liability  the  proportion  of  deposits  to  own  resources  at  that  period, 
was  88:5. 

535.  Ed.  Wagon,  "Die  fmanzielle  Entwicklung   der  deutschen  Aktien- 
gesellschaf ten, "  (Jena,  Gustav  Fischer,  1903),  p.  146;  see  p.  470. 

536.  See  Edgar  Jaffe,  p.  198. 

537.  See  Ad.  Wagner,  "Beitrage  zur  Lehre  von  den  Banken,"  Leipzig, 
1857,  pp.  166-170,  and  p.  61. 

538.  On  the  other  hand,  however,  it  must  be  remembered  that  if  in 
time  of  crisis  a  demand  is  made  on  a  bank  for  immediate  payment  of 
money  which  according  to  existing  agreement  is  only  due  within  a  short 
time,  it  can  not  afford  to  refuse   except  in   case  of  necessity,  and  even 
then  for  the  most  part  not  without  risk.     A  different  opinion,  at  least 
apparently,  is  expressed  in  Der  Deutsche  Oekonomist  of  Nov.  n,  1905; 
23d  year,  No.  1194,  p.  566). 

539.  Lansburgh,  loc.  cit.,  pp.  36-38,  refers  to  other  sources  of  error, 
namely,  that  both  the  capital  and  cash  accounts,  and  the  other  balance 
sheet  items  are  considerably  influenced  by  the  reciprocal  relations  of  the 
banks,  so  that  frequently  the  same  amounts  are  necessarily  counted  twice, 
even  three  times.     Consequently,   the  immediately  available  assets  are 
frequently  lower  than  they  appear  in  the  balance  sheet,  for  instance,  when 
according  to  the  example  given  (p.  36)  a  provincial  bank  passes  on  its 
ready  cash  to  a  central  bank.     In  this  case  the  amount  passed  on  figures 
in  the  balance  sheet  of  the  provincial  bank  as  a  bank  credit,  and  in  the 
balance  sheet  of  the  central  bank  as  cash,  and  in  case  the  central  bank, 
as  is  often  done,  books  its  giro  account  at  the  Reichsbank  as  cash,  the  sum 
in  question  will  figure  for  the  third  time  as  the  central  bank's  cash  balance 
at  the  Reichsbank.     This  inconvenience  may  in  part  be  done  away  with 
by  placing  in  the  balance  sheet  of  the  Central  Bank  the  amount  passed 
on  to  it  by  the  provincial  bank  not   only  among  the  cash  holdings,  that 
is  to  say  among  the  assets,  but  also  among  the  debit  items,  that  is  to  say, 
amorrgTEe  liabilities. 

/540.  As  long  ago  as  Sept.  5,  1907,  in  my  report  at  the  Third  General 
Congress  of  German  Bankers  at  Hamburg  (Transactions  p.  22;  and  re- 
print published  by  Leonh.  Simion  Nachfolger,  Berlin,  1907,  p.  32),  I  espe- 
cially emphasised  the  fact  that  a  permanent  falling  off  in  the  liquidity  of 
bank  balances  would  constitute  "one  of  the  most  serious  drawbacks"  of 
the  concentration  in  the  banking  business. 

541.  The  degree  of  liquidity  of  individual  credit  banks  may  of  course 
be  more  or  less  favorable  than  the  average  for  all  banks,  even  decidedly  so. 


90311°— ii 55  849 


National    Monetary     Commission 

542.  In  regard  to  the  liquidity  of  the  Austrian  joint  stock  banks,  Dr. 
Eugen  Lopuszanski,  secretary  to  the  Ministry,  Vienna,  in  a  treatise  entitled : 
^'Einige    Streiflichter    auf    das    Oesterreichische    Bankwesen,"     in     the 
Volkwirtschaftliche  Wochenschrift,  von  H.  Dorn,  vol.  L.  No.  1305,  Dec.  31, 
1908,  p.  442,  writes  as  follows:  "The  liquidity,  in  as  far  as  it  is  exhibited  by 
the  ratio  of  the  so-called  liquid  assets  (cash,  discounts,  loans  on  collateral, 
and  contango)    to    the    total    of    creditors,   deposits    and    acceptances, 
amounted  at  the  end  of  1883  to  about  65  per  cent,  and  at  the  end  of  1907 
to  about  45  per  cent." 

This  comparison  shows  a  considerable  decrease  in  the  liquidity  of  the 
Austrian  joint  stock  banks.  But  even  the  present  percentage  of  45  per 
cent  is  comparatively  favorable. 

543.  I  wish  to  emphasize  once  more  that,  in  reference  to  the  liquidity 
of   the   assets,  the  greatest   difference  may  exist   among   different  banks, 
without  being  noticeable  in  any  balance  sheet  or  summary  statement. 

544.  Conrads  Jahrb.    Ill    series.  Vol.  34,  No.  5,    Nov.    1907,    p.  588; 
cf.  loc.  cit.,  Vol.  XX,  pp.  86-97. 

545.  See  his  article   in  Conrads  Jahrb.  Ill    series,  Vol.   XX,  p.   90,  in 
which  he  calculates  that  on  Dec.  31,   1899,  in   n  Berlin  Banks  the  imme- 
diately available  assets  constituted  only    57  per  cent  of   the  liabilities. 
However,  he  includes  neither  the  loans  on  collateral,  which  for  those  banks 
amounted   to  about  463,000,000  marks  on  the  date  mentioned,  nor  the 
securities  which  in  1898  amounted   for  the  same  banks  to    714,500,000 
marks,  but  solely  cash,  specie,  bank  credits,  bills  and  contango.     This  is 
not  consistent,   for    the  same   objections    that  may  be  made  against  the 
mmediate  availability  of  the  loans  on  collateral  (which  by  the  way  at  that 
time  included  also   the  Bourse   contango)  can   be   made  against  the  con- 
tango, (which  was  regarded  by  Heinemann  as  immediately  realisable),  nay 
even   against  the    bills,   which  likewise  cannot  always  be  realised  at  a 
moment's  notice. 

546.  See  Robert  Franz,  "Die  Deutschen  Banken  im  Jahre  1908,"  p.  549. 

547.  Some  banks,  it  is  true,  hold  no  doubt  large  amounts  of  bills  due  to 
industrial  long-time  investments. 

548.  See  Rob.   Franz,  Die  Deutschen  Banken  im  Jahre   1908  (Reprint 
from  the  Deutscher  Oekonomist,  Berlin,  1908),  p.  549. 

549.  Loc.  cit.,  p.  468-470. 

550.  Transactions,  p.  118. 

551.  The  compilation  given  in  the  "Tag"  of  Apr.   17,    1908,  entitled 
"Die  hauptsachlichsten   Bank-   und    Bankierinsolvenzen    1906-1907,"    is 
utterly  unreliable.     Even  the  title  is  misleading,  inasmuch  as  the  table 
deals  only  with  a  single  credit  bank,  the  Marienburger  Privatbank,  a  joint 
stock  company  with  limited  liability,  with  losses  to  depositors  amounting 
to  6,600,000  marks,  as  already  noted   in  the  above-mentioned  table  by 
Dr.  Salomonsohn.     The  firm  of  Messrs.  Haller,  Sohle  &  Co.,  despite  its 
title  "Hamburger  Bank,"  was  no  Bank,  but  merely  a  private  banking 
eve;tablishment.     On  the  other  hand,  while  the  list  purports  to  be  essen- 


850 


T  h  e     German     Great    Banks 

tially  a  statement  of  losses  of  deposits,  it  quite  unwarrantably  includes 
brokers'  firms,  as  well  as  a  whole  series  of  banking  establishments  which 
either  had  no  deposits,  or  whose  depositors  sustained  no  losses.  One  firm 
had  simply  gone  into  liquidation  because  it  was  taken  over  by  a  bank 
(without  even  a  shadow  of  danger  to  depositors) ;  another  firm,  alleged  to 
have  lost  672,000  marks,  could  not  be  traced  even  with  the  assistance  of 
the  chambers  of  commerce. 

552.  See  Deutscher  Oekonomist,  Jan.   18,   1908,  26th  year,  No.  1308. 

553.  At  the  beginning  of  the  Bank  Inquiry  of  1908,  the  Imperial  chan- 
cellor expressly  stated  through  Herr  Wermuth,  the  Under  Secretary  of 
State,  that  no  division  between  pure  deposit  banks  and  banks  transacting 
miscellaneous  business  was  contemplated. 

554.  See  Edgar  Jaffe,  "Das  Englische  Bankwesen,"  pp.  170-178. 

555.  Caesar  Straus,  loc.  cit.,  pp.  38-39;  Otto  Warschauer,  loc.  cit.,  p.  474. 

556.  This  effectually  disposes  of  the  assertion  by  the  former  bank  official 
Lansburgh  (loc.  cit.,  p.  55)  to  the  effect  that  the  German  bank  managers 
are  opposed  to  deposit  banks  solely  on  the  ground  that  they  are  not  likely 
to  yield  to  them  (the  managers)  sufficient  profit.     This  direct  attack  on  the 
probity  of  all  German  bank  managers  does  not  become  any  more  excusable 
by  the  fact  that  Lansburgh  (ibid.)  starts  with  the  idea  "that  a  deposit  bank 
is  far  more  profitable  than  a  bank  dealing  in  securities,"  an  idea  which,  in 
view  of  the  present  absolutely  and  relatively  small  German  national  wealth, 
is  utterly  erroneous.     This  is  not  and  never  was  the  attitude  of  the  mana- 
gers of  German  credit  banks.     They  are  ready  to  establish  deposit  banks 
immediately  they  become  convinced  of  the  propriety  of  such  a  step,  or  as 
soon  as  legal  enactments  or  the  measures  taken  by  State  institutions  or 
deposit  banks  shall  force  them  to  do  so. 

557.  See  O.  Glauert,  loc.  cit.,  p.  815;  Reichsbank  President  Koch  in 
Bank-Archiv,  4th  year,  No.  5,  March,  1905.     The  statement  that  the  tasks 
of  the  Reichsbank  have  of  late  been  rendered  more  difficult  by  the  "con- 
centration of  the  credit  banks  influencing  the  open  market"  would  apply 
in  a  still  greater  degree  to  the  proposed  Reichsdepositenbank,  and  to  any 
private,  or  non-Federal  state  banks,  except  that  the  effect  of  the  latter 
would  be  not  merely  to  hamper  but  even  to  thwart  the  discount  policy 
of  the  Reichsbank. 

558.  See  Edgar  Jaffe  "Das  Englische  Bankwesen,"  pp.  170-178.     See 
also  an  essay  entitled  "La  haute  Banque  allemande,"  in  "La  chronique 
industrielle,  maritime  et  coloniale,"  Jan.  6,  1905,  p.  3:     "Thanks  to  the 
support  and  aid  lent  to  it  by  high  finance,  German  industry  has  in  a  short 
time  undergone  a  gigantic  development.     There  can  be  no  doubt  that 
without  this  alliance,  without  this  union  of  its  industrial  and  financial 
forces,  the  Empire  would  not  have  achieved  the  wonders  which  we  have 
witnessed." 

See  also  Ad.  Weber,  loc.  cit.,  p.  257,  citing  various  opinions  including 
those  of  Anatole  Leroy-Beaulieu  and  of  an  English  expert,  who  speaks  of 
German  banks  as  follows:  "They  are  virtually  the  pioneers  of  the  home 


National    Monetary     Commission 

and  foreign  trade  of  the  German  Empire"  (see  Frederick  J.  Fuller  and 
H.  D.  Rowan,  "Foreign  competition  in  its  relation  to  banking"  in  the 
Journal  of  the  Institute  of  Bankers,  Vol.  XXI,  Part  II,  p.  55).  Even 
Andre'  E.  Sayous,  who  as  a  rule  has  little  to  say  in  favor  of  the  manage- 
ment of  the  German  banks,  and  who  in  his  book,  Les  Banques  de  Dep6t, 
les  Banques  de  Credit  et  les  Societes  financieres  (Paris,  1901,  L.  Larose), 
pp.  292,  293,  goes  so  far  as  to  assert  that  a  serious  panic,  even  one  of  no 
great  severity,  "would  force  nearly  all  the  German  banks  to  suspend 
payment,"  nevertheless  concludes  the  3d  chapter  of  that  book  with  the 
words:  "Be  this  as  it  may,  while  the  French  banks  have  accentuated  the 
economic  stagnation  of  our  country,  the  German  banks  have  had  a  con- 
siderable share  in  the  brilliant  industrial  and  commercial  expansion  of 
Germany." 

559  I  pointed  out  there,  among  other  things,  that,  so  far  as  human 
foresight  goes,  there  was  no  reason  to  expect  that  the  Reichsdepositen- 
bank  would  receive  deposits  to  the  extent  of  at  least  1,000,000,000 
marks,  the  amount  on  which  Warschauer  bases  his  calculation  of  the 
chances  of  profit — unless  the  funds  collected  by  the  postal  cheque  offices 
were  assigned  to  it.  Even  assuming  this,  the  business  expenses  must  be 
deducted  from  the  gross  profits,  which  at  first  could  hardly  exceed  i  per 
cent.  As  the  expenses  of  the  German  credit  banks  absorb  31  per  cent  of 
their  gross  profits  (see  Rob.  Franz,  "Die  Deutschen  Banken  in  1907,"  p. 
78),  and  in  the  case  of  Berlin  banks  even  33  per  cent,  the  net  profits  would 
scarcely  amount  to  more  than  one-fourth  to  one-half  of  i  per  cent  on  the 
interest-bearing  deposits,  and  the  dividends  would  amount  to  about  5  to 
6  per  cent,  according  to  the  amount  of  the  share  capital.  Even  this 
would  only  be  reached  gradually.  Further,  I  pointed  out  that  the  analogy 
with  the  English  deposit  banks,  whose  dividends  had  led  Warschauer  to 
make  his  estimate,  did  not  hold.  In  the  first  place,  in  England  the  paid- 
up  share  capital,  on  which  dividends  are  to  be  paid  is,  in  contrast  to  the 
reserves,  absolutely  and  relatively  trifling  in  amount  (in  1904  for  87  deposit 
banks  an  average  of  15,000,000  marks  per  bank),  while  the  turnover  and 
deposits  are  extremely  large,  6,250,000,000  marks  (see  p.  202).  More- 
over, deposits  accepted  in  London  with  or  without  the  condition  of  two 
weeks'  notice  bear  interest  only  at  \]4  per  cent  below  bank  discount,  and 
this  applies  to  only  such  deposits  that  have  been  at  the  bank's  disposal 
for  at  least  one  month,  the  minimum  amount  of  deposit  at  any  time  being 
£10.  I  have  misgivings  concerning  the  use  to  be  made  of  "first-class" 
industrial  securities  and  bank  shares  for  loans  on  collateral  up  to  30  per 
cent  of  their  market  value,  a  device  admitted  by  Warschauer  manifestly 
to  increase  the  lucrativeness  of  the  proposed  institution.  At  his  demand 
I  will  explain  that  these  misgivings  are  based  on  the  fact  that  dividend- 
paying  securities  are  subject  to  great  fluctuations  in  quotation  and,  in 
critical  times,  can  either  not  be  sold  at  all  or  only  at  a  great  sacrifice, 
while  on  those  very  occasions  the  margin  is  with  difficulty  kept  up  and 
the  repayment  of  advances  can  not  be  readily  expected.  Further,  the 


852 


The     German     Great     B 


a  n 


practice  which  Warschauer  is  disposed  to  admit  would  lead  to  the  very 
evil  for  which  the  English  deposit  banks  are  blamed,  namely,  the  use  of 
deposits  for  Bourse  speculation.  Finally,  as  regards  the  "acquisition  of 
first  mortgages"  by  deposit  banks  pure  and  simple,  which  Warschauer 
even  deems  "advisable"  (geboten),  I  do  not  regard  it  as  a  desirable 
investment,  at  least  to  a  considerable  extent,  since  these  banks  have  to 
be  ready  at  any  time  to  repay  call  deposits  or  short-term  deposits,  and  it 
may  be  difficult  to  realize  even  on  first  mortgages. 

560.  Nor  can  the  advocates  of  this  idea  appeal  to  the  fact  that  according 
to  Roman  law  the  creditors    of   noninterest-bearing    deposits   possessed 
a  prior  right  in  the  case  of  bankruptcy  of  a  banker  (argentarius),  which 
Papinian  expressly  states  was  introduced  for  the  benefit  of  the  whole 
community  (Utilitate  publica  receptum — see  1.  17,  sees.  2,  3,  8  D,  16,  3), 
for  modern  business  methods  allow  of  no  comparison  with  those  of  the 
argentarius. 

561.  Among  the  arguments  raised  against  it,  see  Deutscher  Oekonomist, 
22d  year,   No.   1127,  p.  432  (July,  1904),  "Suggestions  have  been  made 
relating   to   the   proportion   between   deposits  and   share  capital.     This, 
however,  is  pure  word-play  without  any  value;  for  on  the  one  hand  the 
reserves  are  property  of  the  bank,  just  as  apt  to  be  called  upon  to  cover 
liabilities  as  the  share  capital,  and  on  the  other  hand  the  assets  are  se- 
curity for  all  liabilities,  and  not  merely  for  the  deposits.     To  establish  a 
definite  proportion  between  share  capital  and  deposits  would  have  a  pur- 
pose only  in  case  there  were  no  other  liabilities  than  the  deposits.     That 
is  the  condition  of  the  Savings  Banks,  which  of  course  is  totally  differ- 
ent from  that  of  ordinary  banks." 

562.  See  Deutscher  Oekonomist,  July  13,  1904  (22d  year,  No.  1127)^.432. 

563.  This  remark,  though  often  repeated,  is  a  gross  exaggeration,  to 
say  the  least,  intended,  or  at  least  apt,  to  scare  the  timid.     The  national 
wealth  certainly  does  not  consist  merely  of  deposits,  bills  and  current 
account  balances,  which  for  all  those  banks  that  had  at  least  1,000,000 
marks  capital  each  amounted  at  the  end  of  1908  to  about  7,250,000,000 
marks.     Of  these  banks  only  the  largest  are  managed  by  10  to  12  man- 
agers, just  as  State  and  private  industrial  and  agricultural  concerns.     On 
the  contrary  the  national  wealth,   estimated   at  present  to  be  between 
216,000,000,000  to  360,000,000,000  marks,  consists  of  a  great  number  of 
enormous  items,  such  as  the  savings  deposited  in  savings  banks  and  coop- 
erative societies  to  the  amount  of  about  of  about  14,000,000,000  marks,  of 
the  vast    amounts,    totaling    about    40,000,000,000   marks,    invested    in 


mortgages  and  mortgage  bonds,  etc. 


Nevertheless,  I  do  not  underrate  the  great  power  and  responsibility  of 
the  heads  of  our  great  banks,  as  this  book  will  show. 

564.  In  Schmoller's  Jahrbuch,"   vol.   31,    No.   4,   Der  Deutsche  Geld- 
markt,"  pp.  72-95, 

565.  Heiligenstadt  very  properly  omits  debits  on  current  account  from 
the  list  of  immediately  available  assets.     In  giving  his  reasons  for  this 


853 


National    Monetary     Commission 

omission,  he  makes,  however,  the  surprising  statement  (p.  82)  that  "  With  a 
view  to  aiding  the  enlargement  of  commercial  and  industrial  enterprises 
and  enabling  them  to  complete  their  works,  the  banks  grant  credit  to  these 
enterprises,  in  the  form  of  current  account  credit,  quite  regularly,  and  to  an 
increasing  degree  as  the  money  market  becomes  less  favorable  (!).  This 
is  done  in  the  hope  and  with  the  purpose  of  restoring  the  liquidity  of  such 
loans  by  the  issue  of  shares  and  debentures,  when  the  money  market 
becomes  more  favorable."  It  is  hard  to  imagine  how  the  banks  could 
have  pursued  such  a  business  policy.  What  really  occurred  occasionally 
was  that  certain  credits  which  were,  originally  working  credits  were,  through 
the  debtor's  inability  to  pay,  gradually  transformed  into  investment  credit 
(Anlage-Kredit)  very  much  against  the  will  of  the  creditors;  or,  that 
credit  which  was  really  intended  to  be  used  for  investment  was  applied 
for  as  working  credit  (Betriebskredit),  or  finally,  that  during  good  times 
(or  such  as  were  considered  good)  the  long-term  credit,  that  is  to  say, 
investment  credit,  necessary  for  finishing  works  already  begun,  or  for 
extending  existing  works,  so  as  to  make  them  profitable  even  in  critical 
times,  was  granted  in  the  hope  and  expectation  that  the  debtor  would  soon 
be  able  to  get  clear  of  it  in  the  form  of  debentures,  or  shares.  Lansburgh 
probably  goes  too  far  when  he  says  that  the  credit  granted  to  industrial 
companies  is  "distinguished"  from  all  other  credit  in  that  it  can  be  cast 
off  at  almost  any  period  desired  ("Die  Verwaltung  des  Volkvermogens 
durch  die  Banken,"  [separate  reprint]  pp.  9-10). 

During  many  years  of  practical  experience  in  banking  I  have  not  met 
with  a  case  where  a  bank  or  bank  director  in  his  sound  senses  granted 
credit  regularly  during  bad  times  and  even  "  to  an  increasing  degree  as  the 
market  becomes  more  unfavorable,"  with  the  idea  of  restoring  its  liquidity 
by  issuing  shares  and  debentures  at  a  more  favorable  season,  and  I  do  not 
believe  that  such  banks  or  bank  directors  could  remain  in  business  very  long. 

It  may  not  be  amiss  to  point  out  that  credit  banks  have,  on  the  other 
hand,  been  frequently  reproached  with  the  opposite  policy  of  having 
constrained  manufacturers  to  adopt  the  generally  unsuitable  and  far  too 
expensive  short-term  personal  credit  with  quick  and  frequent  renewals, 
although  in  the  case  of  improvements,  rebuilding,  and  the  erection  of  new 
works,  long  term  credit,  irredeemable  for  many  years,  or  at  least  credit 
repayable  in  instalments,  is  more  suitable. 

566.  See:    Commission  report,  p.  26  "*     *     *     that  it  would   be  out- 
right unbusinesslike,   especially  in  the  case  of  industrial  companies,   to 
oblige  them  to  withdraw  money  for  the  reserve  funds  from  their  business 
and  invest  it  independently,  whereas  they  may  perhaps  be  compelled  to 
borrow  the  necessary  capital  at  a  higher  rate  of  interest.     *     *     *" 

567.  See  "Deutscher  Oekonomist,"  Dec.  28,  1901,  (Vol.  XIX,  No.  993). 

568.  George  Bernhard  in  "Plutus,"  Apr.  24,  1909,  p.  306. 

569.  Reprinted  among  others  by  Ad.  Weber,  loc.  cit.,  pp.  259,  260. 

570.  See  Felix  Hecht,  "  Die  Katastrophe  der  Leipziger  Bank,"  (Storungen 
im  Deutschen  Wirtschaftsleben  wahrend  der  Jahre  1900  ff,  published  by 


854 


The     German     Great    Banks 


the  Verein  fur  Socialpolitik,  Vol.  6,  Geldmarkt,  Kreditbanken,  p.  373,  et 
seq.):  "At  the  end  of  1900  the  Leipziger  Bank,  according  to  its  balance 
sheet,  held  bills  amounting  to  37,798,570.67  marks.  But  this  balance  sheet 
does  not  show  that  about  12,000,000  marks  of  these  bills  were  pledged 
to  the  "lottery  loan  fund"  (p.  384). 

571.  As  an  additional  argument  against  the  demand  for  a  statement  of 
the  "total  of  moneys  employed  for  contango  transactions  and  loans  on 
collateral,"  the  following  may  be  urged:   Nothing  is  gained,  least  of  all  the 
object  aimed  at,  by  showing  the  extent  to  which  the  bank  has  favored 
speculation,  as  the  contango  and  loans  on  collateral  may  comprise  quite 
different   engagements  and  advances  on  goods.     Neither  can  the  kind, 
number  and  above  all  the  quality  of  the  securities  deposited  at  the  bank 
as  guarantees  be  ascertained  from   the  statement  demanded,   although 
these  are  the  most  essential  points;    and  matters  would  not  be  greatly 
altered  if  the  "total  amount" — nothing  else  is  possible — of  the  guarantees 
were  also  published. 

572.  Doctor  Salomonsohn  in  Transactions  of  the  III  General  Congress 
of  German  Bankers,  p.  116. 

573.  In  regard  to  this  see  the  very  appropriate  remark  by  Eugen  Lopus- 
zanski  in  his  treatise  "  Einige  Streiflichter  auf  das  Oesterreichische  Bank- 
wesen  (In  the  "Volksw.  Wochenschrif t "  of  Alex.  Dorn,  Vienna,  Dec.  31, 
1908,  Vol.  LX,  No.  1305,  p.  433):    "While  banking,  outwardly,  forms  only 
a  limited  part  of  the  national  economy,  yet  by  reason  of  its  organic  arrange- 
ment and   purpose  it  is  best  fitted,  through   its   condition  at  any  given 
moment,  to  exhibit  the  interaction  of   the  forces  and  the  results  of  the 
movement  of  the  national  economy,  in  a  cross  section,  as  it  were,  of  the 
economic  organism." 

574.  See  the  essay:    "Spargelder"  in   the  "Neue  Politische  Correspon- 
denz"  of  May  21,  1909. 

575.  Such  a  case  is  mentioned  by  the  "Neue  Politische  Correspondenz" 
of  May  21,  1909. 

576.  See  "Aelteste  der  Berliner  Kauf mannschaf t "  in  the  Berl.  Borsen- 
Zeitung,  No.  264,  June  9,  1909;   Alfred  Loewenberg  in  the  "Tag,"  No.  198, 
Aug.  25,  1909,  and  especially  Koch  in  the  "Zeitschrift  fur  Handelswissen- 
schaft  und  Handelspraxis,"  Vol.  II;  p.  38  et  seq.,  who  justly  points  out, 
that  the  proposal  to  increase  the  personnel  seems  rather  strange  at  a  time 
when  everbody  is  studying  how  to  reduce  the  number  of  employees. 

577.  In  his  book  "Beitrage  zur  Lehre  von  den  Banken,"  Leipzig,  1857 

P-  159- 

578.  Ad.  Wagner,   "Bankbriiche  u.  Bankkontrollen,"  in  the  Deutsche 
Monatsschrift  fur  das  gesamte  Leben  der  Gegenwart   (ibid.   Lohmeyer) 
Year  I,  No.  i  (Oct.,  1901),  pp.  74-85,  and  No.  2  (Nov.,  1901),  pp.  248-258, 
especially  p.  255.     See  on  the  other  hand  the  Deutscher  Oekonomist  of  Oct. 
19,   1901,  and  Nov.   i,   1902,  and  R.  Rosendorff,  "Bankbriiche  u.  Bank- 
Kontrollen,"  in  Hirths  "Annalen  des  Deutschen  Reichs,"   1902,  No.  3, 
pp.  182-197. 


855 


National     Monetary     Commission 


579.  Paul  Marcuse,  loc.  cit.,  p.  136. 

580.  The  fact,  noted  by  Obst,  that,  according  to  the  report  of  the  Comp- 
troller of  the  Currency  of  Sept.  23,  1908,  the  majority  of  the  presidents  of 
the  national  banks  have  declared  themselves  satisfied  with  the  supervision 
hitherto  exercised  by  the  "national  bank  examiners,"  does  not  necessarily 
mean  that  this  method  has  served  its  purpose;  it  may  mean  something 
totally  different. 

Part  IV. 

1.  See  Hermann  Schumacher,  Die  Ursachen  und  Wirkungen  der  Kon- 
zentration  in  deutschen  Bankwesen  (Causes  and  Effects  of  Concentration 
in  German  Banking)  in  Schmoller's  Jahrbuch,  Jan.  27,  1906,  Vol.  XXX, 
No.  3,  pp.  884,  et  seq.     Paul  Wallich,  Konzentration  in  deutschen  Bank- 
wesen (Concentration  in  German  Banking),  Stuttgart  and  Berlin,  Cotta, 
1905.     Julius  Steinberg,  Die  Konzentration  in  Bankgewerbe  (Concentra- 
tion in  Banking),    Berlin,   Franz  Siemenroth,    1906.     Adolf  Weber,    Die 
Konzentration  in  deutschen  Bankwesen  (Concentration  in  German  Bank- 
ing), Krit.  Blatter,  f.  d.  ges.  Sozialwissenschaften,  Vol.  II,  No.  7,  pp.  299- 
303.     Edgard  Depitre,  Le  mouvement  de  concentration  dans  les  Banques 
Allemandes  (The  concentration  movement  among  German  Banks),  Paris, 
Arthur  Rousseau   1905.     Otto  Warschauer,   Die  Konzentration  im  deut- 
schen  Bankwesen    (Concentration  in  German   Banking),    Conrad's  Jahr- 
biicher,  3d  series,  Vol.  XXXII,  pp.  145-162.     Andre  Sayous,  La  concentra- 
tion de  trafic  de  banque  en  Allemagne,  Journal  des  Economistes  Jan.  15, 
1899. 

2.  W.  Sombart,  Der  moderne  Kapitalisnms,  Vol.  I,  p.  407. 

3.  For  a   description   of  the   movement   of  concentration   in   banking 
abroad  see  the  very  excellent  accounts  in  the  Vossische  Zeitung  of  Jan.  26, 
27,  28,  and  31,  1905.     (They  cover  Austria-Hungary,  Great  Britain,  France, 
Belgium,  and  the  United  States.)     Use  has  been  made  of  these  articles  in 
various  parts  of  the  following  discussion. 

4.  On  this  point   the.  best   references  are   the  different   sections  (lec- 
tures) of  the  classic  work  of  Karl  Biicher,  Die  Entstehung  der  Volkswirt- 
schaft  (The  Evolution  of  Economic  Society),  Tubingen,  Laupp'sche  Buch- 
handlung,  1901,  and  particularly  the  following  sections:    IV,  Die  gewerb- 
lichen  Betriebssysteme  in  ihrer  geschichtlichen  Entwicklung,  (The  Indus- 
trial Systems    in  their  Historical    Evolution),   pp.    175   et  seq.;    V,   Der 
Niedergang  des  Handwerks  (Decline  of  the  Handicraft  System),  pp.  215 
et  seq.;   VII,  Arbeitsvereinigung  und  Arbeitsgemeinschaft  (The  Combina- 
tion and   Concentration   of   Labor);     IX,    Arbeitsgliederung   und   soziale 
Klassenbildung,  p.  283  et  .seq. ;  (The  Division  of  Labor  and  the  Development 
of  Social  Classes)  pp.  367  et  seq. 

5.  In  order  to  avoid  duplication  we  must  refer  to  the  abundant  material 
given  on  this  point  in  what  is  now  Part  III,  Chap.  Ill,  sees,  i  and  2  (See  above 
pp.  191  to  407).     See  also  the  valuable  work  of  Otto  Jeidels,  Das  Verhriltnis 
der  deutschen  Grossbanken  zur  Industrie,   mit  besonderer  Beriicksichti- 


856 


The     German     Great     Banks 


gung  der  Eisenindustrie "  (The  Relation  of  the  German  Great  Banks  to 
Industry,  with  special  reference  to  the  iron  industry1),  Leipzig,  Duncker  & 
Humblot,  1905. 

6.  But  this  does  not  necessarily  mean  the  doubling  of  profits. 

7.  See  Hermann  Schumacher,  op.  cit.,  pp.  5-6.    The  requirements  of  sound 
principle  is  that  customers  receiving  large  amounts  of  credit  from  a  bank 
should  be  obliged  to  confine  their  entire  banking  business  to  the  bank 
advancing  its  credit,  in  order  that  the  bank  may  be  in  a  position  to  keep 
posted  on  the  business  of  the  borrower.     This  requirement  can  not  be 
readily  enforced  owing  to  competition,  but  so  far  as  it  is  practicable,  it  is 
in  a  large  measure  lived  up  to  by  the  banks.     Unfortunately  as  the  Ter- 
linden  case  has  proved,  the  observance  of  this  obligation  by  the  customer* 
can  not  be  readily  controlled.     So  long  as  there  is  no  central  credit  agency, 
such  a  clause  in  the  contract  must  remain  a  lex  imperfecta.     Owing  to 
practical  difficulties,  such  an  agency  has  not  yet  been  established,  although 
a  few  attempts  have  been  made. 

8.  This  too  is  a  function  of  the  bank  floating  securities,  or  of  the  banks 
interested  in  selling  the  stocks  or  bonds  in  connection  with  an  issue  of 
securities.     For  this  activity  exclusively,  as  distinguished  from  the  banker's 
work  as  broker,  he  receives  a   "bonus."     The  bonus  represents  thus  a 

-special  compensation  for  a  special  service  performed  by  the  banker.  The 
service  consists  in  the  obligation  assumed  by  the  banker  to  make  every 
effort,  and  to  utilize  his  special  knowledge  of  his  clientele  with  a  view  to 
placing  the  securities  issued  in  good  hands,  that  is  to  say,  where  they  will  be 
held  permanently.  This  is  a  duty  that  should  be  done  by  no  one  else  but 
the  banker  and  can  not  be  done  by  any  one  else.  It  is  therefore  unreason- 
able to  require  him  to  divide  the  bonus  with  his  principal,  the  purchaser  of 
the  securities.  Neither  can  it  be  said,  as  the  court  (Reichsgericht,  I 
Zivilsenat)  has  held  in  a  decision  of  Dec.  10,  1904,  that  he  is  acting  with 
fraudulent  intent,  in  case  he  fails  to  inform  the  purchaser  of  the  bonus 
received  by  him,  or  in  turn  fails  to  let  the  purchaser  share  the  benefit  of 
this  bonus. 

9.  See  K.  Fleischhammer,  Zentralisation  im  Bankwesen  in  Deutschland, 
Schmoller's  Jahrbuch  f.  Gesetzgebung,   Verwaltung  und  Volkswirtschaft, 
vol.  25,  No.  2,  pp.  241  et  seq. 

10.  See  No.   12  of  the  Bestimmungen  fur  den  Giroverkehr  der  Reichs- 
bank.     (Rules  relating  to  Giro  Business  of  the  Reichsbank.)     According 
to  No.   10  of  these  rules  money  deposited  for  giro  transactions  does  not 
bear  interest. 

11.  Helfferich,  Der  deutsche  Geldrnarkt  1895-1902,  p.  44. 

12.  It  seems  that  similar  occurrences  have  taken  place  also  in  England, 
(See  Edgar  Jaffe,  Das  Englische  Bankwesen,  p.  190),  also  in  Austria.     In 
1899  the  Anglobank  established  a  branch  in  Aussig,  and  in  the  same  year 
a  branch  was  established  by  the  Wiener  Bankverein.     In  1901  the  Nieder- 
oesterreichische  Escomptegesellschaft  acquired  the  branch  of  the  Bohmi- 
sche  Escornptebank  in  Trautenau,  and  in  the  same  year  a  branch  of  the 


857 


National    Monetary     Commission 

Anglobank  was  opened  in  that  town.  There  are  many  other  such  exam- 
ples which  may  be  found  in  the  Prager  Tageblatt  for  Oct.  12,  1905,  No.  281, 
in  the  article  entitled  "Die  Konkurrenz  im  Oesterreichischen  Bankwesen." 

13.  The  Rhenisch-Westphalian  Pig  Iron  Syndicate  came  to  an  end  on 
Jan.  i,  1909,  as  has  been  noted  above  (see  note  170,  p.  818)  and  likewise 
The  Lorraine-Luxembourg  and  the  Siegerland  pig  iron  syndicates.     For 
details  consult  the  above  discussion. 

14.  Among  them  are  the  general  directors  of  the  following  mining  and  iron 
companies:    Harpener  Bergbau- Aktiengesellschaft,  Oberschlesische  Eisen- 
dustrie-Aktiengesellschaft,  Bergwerkgesellschaft  Hibernia,  Konsolidation, 
Bergwerks-Aktiengesellschaft  zu  Schalke,  Prager  Eisenindustrie  in  Wien, 
Hohenlohe  Werke. 

15.  Among  them  are  the  general  director  of  the  Gelsenkirchener  Berg- 
werks-Aktiengesellschaft,  and  as  representatives  of  shipping  circles  the 
general  directors  of  the  Hamburg- American  Line,  and  of  the  North  German 
Lloyd. 

1 6.  Among  them  are  a  former  director  of  the  firm  of  Friedrich  Krupp, 
and  a  general  director  of  each  of  the  following  mining  and  smelting  com- 
panies:   Laura  Hutte,   Bismarkhiitte,   Schlesische   Aktiengesellschaft  fur 
Bergbau  und  Zinkhiittenbetrieb  in  Lipine,  and  the  Kattowitzer  Aktien- 
gesellschaft fiir  Bergbau  und  Eisenhuttenbetrieb. 

17.  See  Frankfurter  Zeitung  of  May  26,  1884,  No.  147. 

1 8.  The  new  tax  provision  was  particularly  oppressive  for  the  buyer 
since  the  tax  was  paid  in  every  case  on  multiples  of  1,000  marks. 

19.  See  Centralverbands-Denkschrift  of  December,  1903,  pp.  32-34  and 
the  Verhandlungen  des  II  Allgem.  Deutschen  Bankiertages  (Proceedings 
of  the  Second  General  Convention  of  German  Bankers)  at  Berlin,  May  1 6 
and  17,  1904,  p.  58  (Mommsen),  pp.  73-74  (Arons),  pp.  83-84  (Franck), 
and  the  Frankfurter  Zeitung  of  May  31,  1901. 

20.  See  Centralverbands-Denkschrift,  pp.  42  et  seq.  and  the  Proceedings 
of  the  First  General  Convention  of  German  Bankers  at  Frankfort-on-the- 
Main,  Sept.  19  and  20,  1902,  pp.  58-59  (von  Pflaum),  and  Dr.  Alfred  Meyer, 
Die  deutschen  Borsensteuern  1881-1900  (German  Stock  Exchange  Taxes), 
Stuttgart  and  Berlin,  J.  G.  Cotta'sche  Buchhandlung  Nachf.  1902,  pp.  55 
et  seq. 

21.  See   Riesser,    Das    Bankdepotgesetz   voin    5,    Juli    1896.     Aus   der 
Praxis  und  fur  die  Praxis,  insbes.  des  Handelsstandes,  erlautert  (The  Bank 
Deposit  Law  of  July,  1896,  based  on  its  practical  application,  and  explained 
for  practical  use,  for  special  use  of  the  commercial  classes).     Berlin,  Otto 
Liebmann,  2d  ed.  1906,  pp.  67  et  seq. 

22.  For  a  discussion  of  the  economic  injury  resulting  from  the  stock 
exchange  law,  see  among  others,  Riesser,  Die  Notwendigkeit  einer  Revision 
des  Borsengesetzes  vom  22  Juni  i896/Jan.  i,  1897  (The  Need  for  a  Revision 
of  the  Stock  Exchange  Law  of  June  22,  1896,  effective  January  i,  1897), 
Berlin,  1902,  Leonhard  Simion   Nachf.;   and   Stand  und  Aussichten  der 
Borsengesetzreform  (Position  and  Prospects  of  the  Stock  Exchange  Reform 


858 


The     German     Great    Banks 


Legislation,  Berlin,  1907,  Leonhard  Simion  Nachf.)  and  works  mentioned  in 
note  indicated  by  one  asterisk  (*)  in  the  aforementioned  Centralverbands- 
Denkschrift,  p.  17.  Reference  may  be  made  to  the  following  economic 
literature  of  more  general  character: 

Franz  Eulenburg,  Die  gegenwartige  Wirtschaftskrisis,  vSymptome  und 
Ursachen,  Conrad's  Jahrbiicher,  3d  series,  Vol.  XXIV,  p.  382 ;  Helfferich,  Der 
deutsche  Geldmarkt  1895-1902,  op.  cit.,  p.  27;  Ad.  Weber,  Depositen- 
banken  und  Spekulationsbanken,  p.  7;  Rud.  Eberstadt,  Die  gegenwartige 
Krisis,  ihre  Ursachen  und  die  Aufgaben  der  Gesetzgebung,  Berlin,  1902,  K. 
Hoffmann,  p.  33;  v.  Halle,  Amerika,  seine  Bedeutung  fur  die  Weltwirt- 
schaft  und  seine  wirtschaftlichen  Beziehungen  zu  Deutschland,  insbeson- 
dere  zu  Hamburg  (America,  Its  vSignificance  in  the  Economic  Life  of  the 
World,  Its  Economic  Relations  to  Germany  and  Particularly  to  Hamburg), 
published  by  the  Hamburger  Borsenhalle,  1905,  particularly  p.  31 :  "  Under 
the  ill-advised  stock  exchange  laws  of  the  last  ten  years,  there  has  been  no 
proportionate  progress  even  in  participation  in  the  financial  operations  of 
the  various  States."  See  also  Otto  Warschauer,  Die  Reform  des  Borsen- 
gesetzes  in  Deutschland  in  Conrad's  Jahrb.  f.  Nationalokonomie  und 
Statistik,  3d  series,  Vol.  XXX,  No.  4,  Oct.  1905,  pp.  433-469. 

23.  These  limitations  became  applicable  to  both  "legitimate"  as  well  as 
"illegitimate"  dealings  in  futures. 

24.  Helfferich,  op.  cit.,  p.  27. 

25.  See  among  others  the  annual  report  of  the  Deutsche  Bank  for  1895 
and  that  of  the  Dresdner  Bank  for  1896. 

26.  See  the  article  in  the  Frankfurter  Zeitung  of  Nov.  15,  1904,  No.  318 
entitled  Borsengesetz  und  Bankenanschwellung  (Stock  Exchange  Legisla- 
tion and  the  Growth  of  the  Banks).     This  article  shows  in  two  tables  the 
growth  that  has  taken  place  in  the  case  of  10  Great  Berlin  banks  and  20 
provincial  banks  contrasting  their  situation  in  1896  and  again  in  1903  with 
their  position  in  1884. 

27.  As  early  as  the  beginning  of  the  seventies  the  "provincial"  banks 
established  were  based  almost  entirely  on  private  banks  which  had  been 
transformed  or  absorbed,  as  for  instance  the  Provinzial-Disconto-Gesell- 
schaft,   the  Provinzial-Gewerbebank  in  Berlin,   the  Stiddeutsche  Provin- 
zialbank   in   Stuttgart,    the   Prov.    Wechslerbank   in   Breslau,    the   Prov. 
Maklerbank  in  Berlin  and  the  Allgemeine  Deutsche  Filialen-Kreditanstalt 
in  Leipzig.     The  idea  of  these  provincial  or  union  central  banks  was  ahead 
of  its  time,  and  for  that  reason  failed  in  most  instances. 

As  regards  England,  see  Edgar  Jaffe,  Das  Englische  Bankwesen,  p.  192; 
1844-1875;  Gradual  Consolidation  of  Joint  Stock  Banks  in  London  and 
the  Provinces  as  a  result  of  the  absorption  and  supplanting  01  private 
banking  firms;  1878-1890,  consolidation  of  the  provincial  banks  and  the 
formation  of  large  institutions;  some  of  the  latter  gaining  a  foothold  in 
London;  1890-1896,  almost  total  supplanting  of  private  banking  firms  in 
London  as  well.  The  great  provincial  banks  have  become  consolidated 
in  London.  J.  W.  Gilbart,  op.  cit.  (ibid.,  1901),  p.  423  mentions  the  fact 


859 


National     Monetary     Commission 

that  as  early  as  1836  no  fewer  than  138  private  banking  establishments  had 
merged  with  deposit  banks.  The  number  of  private  bankers  in  England 
and  Wales  declined  from  448  in  1837  to  261  in  1858,  to  226  in  1878,  to  144 
in  1891  and  to  100  in  1896. 

With  reference  to  Austria,  the  Neues  Wiener  Tageblatt  said  as  far  back 
as  September  13,  1903,  that  the  private  banker  "has  disappeared  even 
more  rapidly  than  in  Germany,  we  have  well  nigh  reached  the  final  stage 
in  that  process." 

According  to  the  Berliner  Tageblatt  (of  May  27,  1904,  No.  265),  not  a 
single  private  banker  remained  in  Crefeld  out  of  20  that  had  once  been  in 
business  there.  For  the  disadvantages  resulting  from  the  decline  of  the 
profession  of  the  private  banker  see  Frankfurter  Zeitung  of  Jan.  n,  1905, 
"  Aktienbanken  und  Privatbankiers  "  and  the  Central verbands-Denkschrift 
of  1903,  p.p.  39  et  seq. 

In  the  United  States,  private  bankers  until  quite  lately  were  still  numer- 
ous (numbering  in  1902,  4,188),  in  spite  of  the  exceptional  growth  in  number 
of  joint-stock  banks,  which  increased  from  9,338  in  1892  to  13,684  at  the 
close  of  1903  (Vossische  Zeitung,  Jan.  31,  1905),  and  in  spite  of  the  fact 
that  here  too  bank  consolidations  have  played  a  great  part.  (In  1901,  27 
national  banks  were  absorbed  by  other  national  banks,  in  1902,  46). 

The  special  report  of  the  U.  S.  Monetary  Commission  gives  under  date 
of  Apr.  28,  1909,  the  total  number  of  private  banks  as  1,497,  as  compared 
with  6,888  national  banks  and  11,292  state  banks  on  the  same  date.  This 
number  is  exclusive  of  642  mutual  savings  banks,  1,061  stock  savings 
banks,  and  1,079  loan  and  trust  companies.  The  total  number  of  corporate 
and  private  banks,  including  those  which  had  failed  to  report  to  the  Com- 
mission, is  estimated  at  about  25,000. 

28.  See  below  for  a  discussion  of  the  question,  whether  the  resultant 
severe  depression  and  the  lack  of  vitality  occasioned  by  it,  was  justified 
to  the  extent  observed.      (Part  VI,  p.  751). 

29.  As  an  example  we  may  cite  the  increase  in  small  landholdings  (less 
than  two  hectares)  shown  by  the  census  of  1895.     These  form  58  per  cent 
of  all   agricultural   holdings.     In    1895    they   amounted   to   3,236,367,  as 
against  3,061,831  in  1882.     (Statist.  Jahrb.  f.  d.  Deutsche  Reich  fur  1904, 
p.  24.) 

30.  In  consequence  of  mergers,  the  number  of  London  banks  (exclusive 
of  colonial  and  so  called  foreign  banks)  decreased  from  115  in  1885  to  77 
in  1901.     (See  Schmoller,  Grundriss  II,  p.  232.) 

31.  Op.  cit.,  pp.  198-247.     See,  however,  his  study,  Die  Wirkungen  des 
Borsengesetzes  auf  das   Bank-und    Borsengeschaft    (Effect  of   the  Stock 
Exchange  Law  on  the  Business  of  the  Banks  and  Stock  Exchanges)  in 
Conrad's  Jahrb.  1897,  3d  series,  Vol.  XIII  pp.  725  et  seq. 

32.  Centralverbands-Denkschrift  for  December,  1903,  p.  37,  and  Table 
XV,  p.  68. 

33.  These  were  the  terms  used  by  Eschenbach  at  the  general  convention 
of  the  Verein  fur  Sozialpolitik  in  1904  (Verhandlungen,  p.  286)  in  con- 


860 


The     German     Great     B 


a  n 


tro verting  those  who  held  that  there  had  been  a  "relative  decline,"  as  well 
as  an  absolute  diminution  in  the  number  of  private  bankers.  Eschenbach 
himself  seems  to  admit  that  there  had  been  a  relative  decrease,  but  does 
not  attribute  it  to  the  stock-exchange  law.  In  my  opinion  there  is  not 
much  difference  between  these  two  views;  according  to  the  above  data 
both  views  would  seem  sufficiently  founded. 

34.  Op.  cit,  p.  248. 

35.  Op.  cit.,  p.  263. 

36.  Paul  Wallich  (op.  cit.,  p.  13)  calls  attention  to  another  circumstance 
which  tended  to  drive  private  firms  out  of  the  banking  business  to  an 
increasing  extent — the  establishment  of  branches  of  the  Reichsbank  in 
the  Provinces.    This  caused  severe  competition  to  the  private  bankers  along 
the  most  legitimate  lines,  even  in  such  places  where  joint  stock  banks  had 
not  yet  made  their  influence  felt.     This  competition  of  the  Reichsbank,  it 
is  claimed,  was  particularly  severe  in  the  eastern  part  of  the  Kingdom  of 
Prussia,  for  the  reason  that  the  Reichsbank  rates  for  discount  and  Lombard 
loans,  uniform  for  the  entire  Empire,  were  much  lower  than  the  rates 
charged  before  the  advent  of  the  Reichsbank,  and  thus  caused  an  enor- 
mous lowering  of  interest  rates  in  the  respective  sections  of  the  country. 

37.  Op.  cit.,  p.  248.     The  Centralverband  was  unable  to  obtain  abso- 
lutely accurate  figures  on  this  point,  as  the  Denkschrift  reports.     More 
important,  however,  is  the  testimony  of  the  author,  who  is  a  private  banker 
in  Berlin.     A  large  proportion  of  the  private  firms  still  in  existence  have 
continued  their  business,  in  order  not  to  deprive  of  a  livelihood  employees 
who  had  served  them  for  many  years.     The  business  of  many  of  these 
firms,  however,  no  longer   represents  any  considerable  amounts.     Julius 
Steinberg  (op.  cit.,  p.  9)  did  not  assert,  as  the  Deutscher  Oekonomist  of 
December  23,  1905,  wrongly  assumed,  that  "generally  speaking  the  number 
of  private  bankers  had  not  declined,  but  on  the  contrary  had  increased 
somewhat  "     This  assertion  he  made  only  for  some  German  large  cities; 
on  the  other  hand,  for  the  stock  exchange  centers  of  Berlin  and  Frankfort  - 
on-the-Main  he  showed  a  decrease. 

38.  See  Julius  Steinberg,  op.  cit.,  p.  9.     The  figures  reprinted  here,  taken 
from  the  giro-accounts  of  the  Reichsbank  and  continued  to  1904,  do  not 
give  a  clear  picture,  for  the  reason  that  no  distinction  is  made  between  the 
provincial  banks  which  had  remained  independent  and*  the  private  banking 
firms. 

39.  I  call  attention  here  again  to  the  fact  that  the  decline  of  private 
banking  like  the  concentration  in  banking,  was,  in  my  opinion,  only  hastened 
by  the  stock-exchange  law  and  not  caused  by  it.     Even  without  the  stock- 
exchange  law,  the  movement  toward  concentration  so  clearly  seen  in  en- 
tirely different  fields,  and  in  foreign  countries  as  well  as  in  Germany,  would 
have  set  in,  though  perhaps  not  with  such  intensity  and  rapidity.     We  have 
here  only  one  phase  in  a  great  and  universal  process  of  economic  evolution. 
Concerning  England,  Edgar  Jaffe  tells  us  (Inaugural-Dissert,  p.  33)  that  of 
the  old  private  banking  firms  that  belonged  to  the  clearing  house  (40  in 


861 


National    Monetary     Commission 

1810)  only  13  retained  their  membership  in  1873  and  3  in  1900.  However, 
English  conditions  can  not  be  used  for  comparison,  for  the  reason  that,  as 
Jaffe  reports,  (Das  Englische  Bankwesen,  p.  93)  in  the  closing  decades  of  the 
nineteenth  century,  no  new  members  were  admitted  to  the  clearing  house, 
not  even  banks. 

40.  According  to  Ad.  Weber,  Die  rheinisch-westfalischen  Provinzbanken 
und  die  Krisis  (Schriften  des  Vereins  f.  Sozialpolitik  CX,  and  Storungen 
im  deutschen  Wirtschaftsleben  etc.  Vol.  VI,  pp.  326,  327).     The  inference 
made  there  that  the  capital  stock  of  these  banks  increased  during  this 
period  relatively  more  rapidly  than  that  of  the  large  Berlin  banks  cannot 
be  accepted  as  correct  without  further  evidence.     In  the  first  place  com- 
parison is  made  with  only  6  of  the  10  great  Berlin  banks  then  in  existence. 
As  a  matter  of  fact  these  banks  increased  their  capital  stock  during  these 
seven  years  "only"  from  428,000,000  million  marks  to  705,000,000  marks  or 
"only"  about  64  per  cent  whereas  the  increase  for  the  other  banks  is  226 
per  cent.     In  the  second  place,  all  these  large  banks  had  previously  made 
large  additions  to  their  capital  beginning  with  1885. 

41.  For  other  calculations  see  the  article  in  the  Frankfurter  Zeitung  for 
May  6  and  7,  1903,  Nos.  125  and    126,  Konzentration  im   Bankgeschaft, 
and  for  Nov.  15,  1904,  No.  318,  Borsengesetz  und  Bankanschwellung.     If 
the  period  for   1890-1901   is  taken,  a  different  picture  is  obtained.     See 
W.  Christians,  Die  Entwicklung  der  deutschen  Aktienbanken  von  1890- 
1901  in  Bank-Archiv.,  vol.  2,  No.  4  Jan.  1903,  pp.  53  et  seq.,  and  particu- 
larly p.  56.      (Appeared  also  as  reprint). 

42.  The  Oberbergische  Bank  with  the  cooperation  of    the   Rheinisch- 
Westfalische  Disconto-Gesellschaft  was  consolidated   November  n,  1907, 
with  the  Gummersbacher  Volsbank  into  a  new  corporation,  the  Oberber- 
gische Kreditanstalt  in  Ohl   (capital  2,000,000  marks,  with  branches  in 
Halver  and  Gummersbach). 

43.  See  Paul  Wallich,  op.  cit.,  pp.   16-24.     The  chief  example  is  the 
Provinzial-Discontogesellschaft,  organized  by  the  Disconto-Gesselschaft  in 
1871  with  a  nominal  capital  of  30,000,000  marks  but  liquidated  as  early  as 
1878. 

44.  Die  Konzentration  im  deutschen  Bankwesen,  pp.  34-38. 

45.  Quoted  from  Paul  Wallich,  op.  cit.,  p.  131. 

46.  Die  Diisseldorfer  Stahlwerksverband  was  concluded  until  June  30, 
1912.     As  to  the  Oberschlesischer  Stahlwerksverband  see  note  171,  pp. 
818-819. 

47.  In  alphabetic  order.     The  share  capital  and  reserves,  unless  other- 
wise stated,  are  given  as  reported  on  Dec.  31,  1908. 

48.  Next  to  it,  even  now,  among  the  Berlin  banks,  in  point  of  centrali- 
zation, is  the  Nationalbank  fur  Deutschland,  which  has  no   branches  nor 
communities   of   interest,    but    17    deposit   offices   and   one   commandite 
(The  Mitteldeutsche  Kreditbank  has  no  communities  of  interest,  but  has 
5  branches,  3  commandites,  22  deposit  offices  and  2  agencies). 

49.  See  Appendix  VII,  p.  982. 


862 


The     German     Great     B 


a  n 


50.  As  regards  the  calculation  of  the  full  share  capital,  and  of  the  surplus, 
see  note  p.  58  below. 

51.  See  Supplement  VII,  p.  994  et  seq.     The  Deutsch-Bulgarische  Bank 
in  Sofia  is  not  included,  because  it  is  a  foreign  bank,  nor  the  Revisions-  und 
Vermogensverwaltungs-Aktiengesellschaft,  because  it  is  not  a  bank  proper. 

52.  See  Supplement  VII,  p.  999  et  seq. 

53.  See  Supplement  VII,  p.  1005  et  seq.     The  Ostbank  fur  Handel  und 
Gewerbe  in  1905  absorbed  the  Ostdeutsche  Bank  Aktiengesellschaft  vormals 
J.  Simon  Wittwe  &  Sohne  in  Konigsberg,  formerly  one  of  the  "concern" 
banks  of  the  A.  Schaaffhausen'scher  Bankverein,  and  thus  belongs  now  to 
the  Schaaffhausen  group.     It  formerly  maintained  community  of  interest 
relations  with  the  Bank  fur  Handel  und  Industrie  (Darmstadt er  Bank),  as 
set  forth  in  Supplement  VII,  p.  984  under  2,  and  hence  can  not  be  here 
enumerated  again. 

54.  See  Supplement  VII,  p.  982  et  seq. 

55.  The  Bromberger  Bank  fur  Handel  und  Gewerbe,  formerly  mentioned 
here  as  having  a  community  of  interest  with  the  Ostbank,  has  meantime 
been  absorbed  by  the  latter. 

56.  See,  however,  note  7,  p  1013. 

57.  It  might  also  be  proper  to  include  the  Wurttembergische  Vereinsbank 
(share  capital  30,000,000  marks),  since  there  is  a  community  of  interest 
between   it   and   the   Wurttembergische   Bankanstalt.     (See  Supplement 
VII). 

58.  I  have  here  purposely  left  unnoticed  the  fact  that  the  linking  together 
of  banks  is  in  many  cases  effected  by  means  of  an  exchange  of  shares,  rendered 
possible  through  an  increase  of  the  capital  of  the  annexing  bank.     Thus 
where  the  share  capital  both  of  the  annexing  and  the  annexed  bank  is  taken 
at  full  value,  there  is  often,  though  not  always,  an  excessive,  but  by  no 
means  necessarily  a  double,  reckoning  of  share  capital,  as  a  mere  matter  of 
arithmetic. 

There  may  also  be  cases  in  which  the  same  capital  is  counted  twice  or  even 
three  times,  to  wit,  when  the  annexation  is  effected  not  through  exchange 
but  through  acquisition  of  stock  (without  increase  of  capital).  It  may  be 
that  all  or  part  of  the  capital  of  the  provincial  bank  which  is  annexed  by  a 
central  bank  by  the  latter  method  is  counted  once  more  among  the  "per- 
manent participations"  of  the  central  bank.  On  the  other  hand,  among 
the  "permanent  participations"  of  the  provincial  bank  there  may  be  found 
once  more  the  share  capital,  or  part  of  it,  of  other  banks,  which  the  pro- 
vincial bank  in  its  turn  has  annexed  by  means  of  acquisition  of  shares,  if  it 
has  allowed  these  banks  to  continue  as  separate  stock  companies. 

This  attitude,  which  I  deliberately  took  in  the  first  edition,  I  have  decided 
to  maintain  after  renewed  reflection,  especially  since  every  other  method  of 
calculation  would  lead  to  errors  at  least  equal  and  generally  much  larger  in 
amount,  which  can  only  be  avoided  by  omitting  the  summing  up  of  the 
items  into  a  total. 

In  case  of  an  exchange  of  stock,  it  is  generally  impracticable,  owing  to 
lack  of  data  in  the  reports,  to  ascertain  how  many  shareholders  of  the 

863 


National    Monetary     Commission 

annexed  bank  have  availed  themselves  of  the  offer  to  exchange  their  stock 
for  stock  of  the  annexing  bank.  This  is  strikingly  proved  by  the  laborious 
and  detailed  calculation  which  Ernst  Loeb,  in  his  oft-cited  work  "Die 
Berliner  Grossbanken  in  den  Jahren  1895-1902  "  had  to  make  (pp.  101-103), 
in  order  to  ascertain,  with  only  partial  success,  how  many  shareholders  of 
the  Bergisch-Markische  Bank  and  the  Schlesischer  Bankverein  availed 
themselves  of  the  offer  of  exchange  made  in  1897  by  the  Deutsche  Bank. 

Still  less  is  it  possible,  in  most  cases,  to  ascertain  how  many  of  the  shares 
received  in  exchange  remained  permanently  in  possession  of  the  annexing 
bank,  and  how  many  were  sold.  Thus  any  estimates  that  may  be  made  in 
this  matter  are  almost  entirely  baseless. 

Similarly,  in  the  case  of  mere  acquisition  of  shares,  the  balance  sheets 
furnish  no  definite  data  for  exact  figures,  since  the  "permanent  participa- 
tions" are  mostly  stated  merely  in  the  aggregate. 

Thus,  aside  from  a  few  exceptions,  it  is  impossible  by  this  method  to  ascer- 
tain the  exact  sum  which  would  have  to  be  deducted  from  the  share  capital 
of  the  annexed  banks,  in  order  to  obtain  an  accurate  result.  The  same 
objection,  however,  applies  to  the  method  proposed  by  some,  which  consists 
in  ascertaining  the  book  values  of  exchanged  shares  from  the  balance  sheets 
or  reports  of  the  annexing  banks,  the  reason  being  that  these  book  values  in 
most  cases  can  not  be  ascertained  from  the  sources  in  question,  and  it  would 
of  course  be  unscientific  to  adopt  this  method  where  it  is  possible,  and 
another  method  in  other  instances. 

Moreover  annexations  have  occurred  within  one  and  the  same  group 
either  through  exchange  of  shares  or  through  other  methods  of  acquisition 
of  shares,  that  is  to  say,  without  any  increase  of  capital  on  the  part  of  the 
annexing  bank.  This  leads  to  differences  within  the  various  groups,  which, 
if  taken  into  account  in  the  calculation,  would  result  in  a  totally  false  pic- 
ture of  the  relative  power  of  the  several  groups. 

Finally — and  this  is  perhaps  the  most  important  point — the  aim  is  not 
to  ascertain  the  capital  of  the  several  groups  but  their  capital  power,  and  this 
can  hardly  be  represented  in  any  other  way  than  by  a  statement  of  the  share 
capital  and  reserves,  unless  we  are  prepared,  with  Otto  Jeidels,  (loc.  cit.,  pp. 
91-93)  to  take  a  further  step  and  include  in  the  calculation  the  entire 
earning  capital,  that  is  to  say,  current  account  credits  and  deposits. 

If  the  object  is  simply  to  represent  the  capital  power,  which  in  fact  is  the 
only  point  of  interest,  the  statement  of  the  full  share  capital  and  reserves  is 
justified  by  the  consideration  that,  from  the  outsider's  point  of  view,  the 
sphere  of  influence  of  a  bank,  its  credit  and  business  power,  are  embodied 
in  this  share  capital  and  reserves.  Indeed,  as  rightly  pointed  out  by  W. 
Christians  (in  the  Deutscher  Oekonomist,  Dec.  2,  1905,  23d  year,  No.  1197, 
p.  597),  the  fact  that,  for  example,  the  entire  capital  of  the  Norddeutsche 
Bank  is  held  by  the  Disconto-Gesellschaft,  which  in  turn  has  passed  over 
to  the  shareholders  of  the  Norddeutsche  Bank  50,000,000  marks  of  its  total 
capital  of  170,000,000  marks,  does  not  justify  the  statement  that  the  total 
capital  of  the  Disconto-Gesellschaft  now  amounts  only  to  120,000,000 


864 


Th 


German     Great     Banks 


marks,  and  the  united  capital  of  the  two  banks  only  to  170,000,000,  not 
220,000,000  marks.  This  would  be  so  if  we  admitted  the  principle  that  the 
shares  of  the  annexing  bank  turned  over  for  the  purpose  of  exchange  should 
not  be  counted  together  with  the  shares  of  the  annexed  bank. 

Even  after  the  operation  of  exchange,  the  capital  power  of  the  two  banks 
is  equal  to  the  sum  of  the  share  capital  and  reserves  of  both,  as  has  been 
admitted  by  the  Deutscher  Oekonomist,  not  only  in  the  above-cited  article  of 
Dec.  2,  1905,  on  the  capital  power  of  the  bank  groups  (loc.  cit.,  p.  597)  but 
even  earlier  (in  No.  1178,  July  22,  1905)  as  well  as  by  Julius  Steinberger  (op. 
cit.  p.  7)  and  Otto  Jeidels  (op.  cit.,  pp.  91-92). 

However,  the  whole  question  becomes  rather  immaterial  when  we  con- 
sider the  sums  involved.  The  aggregate  capital  and  reserves  of  the  five 
groups  of  banks,  as  set  forth  above,  is  in  round  numbers  2,000,000,000 
marks.  The  significance  of  this  total  will  not  be  greatly  changed  by  adding 
or  deducting  a  few  million  marks.  For  shares  recurring  as  securities  or 
permanent  participations  in  the  balance  sheets  of  other  institutions,  Wallich 
(op.  cit.,  pp.  138-139,  Table  XIV)  deducts  64,000,000  in  the  case  of  the 
Deutsche  Bank  group,  75,000,000  in  the  case  of  the  Disconto-Gesellschaft 
group,  15,000,000  in  the  case  of  the  Dresdner  Bank  group,  and  22,000,000 
in  the  case  of  the  Darmstadter  Bank  group,  making  a  total  of  176,000,000. 
As  a  matter  of  fact,  these  figures  represent  in  part  arbitrary  assumptions,  as 
do  those  of  Lansburgh  (op.  cit.,  p.  35)  who  assumes  a  like  total  of  500,000,000 
marks  for  all  the  banks. 

59.  In  this  point  I  differ  from  Otto  Jeidels,  op.  cit.,  p.  91-93. 

60.  One  of  the  factors  promoting  the  concentration  of  capital,  as  we 
have  seen,  is  the  formation  of  syndicates  or  groups.     However,  this  factor 
does  not  belong  here,   since  its  professed  aim  is  not  concentration  but 
quite  different  objects,  to  wit,  the  distribution  of  risk  on  the  one  hand 
and  the  facilitating  of  the  issuing  function  on  the  other. 

61.  In  the  Kritische  Blatter  fur  die  gesamten  sozialen  Wissenschaften, 
Vol.  II,  No.  7,  p.  300. 

62.  See  tables  given  by  Jeidels,  op.  cit.,  pp.  172-173. 

63.  According  to  the  table  given  by  Jeidels  (p.  603  et  seq.),  the  follow- 
ing banks  were  represented  during  1905  in  the  supervisory  boards  of  compa- 
nies belonging  to  the  chemical  and  textile  industries: 


Number  of  boards  on 
which  represented. 

In  the 
chemical 
industry. 

In  the 
textile 
industry. 

Deutsche  Bank 

9 
7 
5 
6 
3 

21 

5 
5 

2 

6 

Darmstadter  Bank                                                              

Dresdner  Bank                                                     

90311° — II 56 


865 


National    Monetary     Commission 

64.  Depositenbankwesen  und  Scheckverkehr  in  England,   p.   259. 

65.  In  addition  to  the  economic  factors,  there  are  psychologic  factors 
that  play  a  part  in  this  movement,  the  significance  and  strength  of  which, 
particularly  in  the  field  of  concentration,  we  have  repeatedly  pointed  out 
in  the  text.     Such  factors  are  "the  craving  for  individual  freedom"  (W. 
Sombart,  Der  moderne  Kapitalismus  II,  p.  237),  ampler  room  for  indi- 
vidual exertion,  wider  aims,  etc.,  and,  later  on,  the  attraction  of  a  human 
conglomeration,  of  a  vast  traffic,  of  the  facilities  for  learning  the  latest  in 
economic  and  political  matters,   etc. 

66.  Apart  from  those  banks  which  were    satisfied  with    being    repre- 
sented in  Berlin  by  the  inadequate  method  of  silent  partnership  connections 
(commandites}  with  Berlin  banking  houses  (see  Paul  Wallich,  op.  cit.,  p.  56, 
Table  VIII.) 

67.  The   Breslauer   Discontobank  of   Breslau   had   likewise   founded   a 
branch  in  Berlin  in  1896,  which  was  however  taken  over  in  1902  by  the 
Bank    fur    Handel    und    Industrie. 

68.  This  is  the  same  process  that  may  be  observed  in  France  in  the 
case  of  the  Paris  branch  of  the  Credit  Lyonnais. 

69.  This    is    the   view    of    Rudolf    Eberstadt,    Depositenbanken    und 
Scheckverkehr  in  England,  pp.  251  and  259,  note  2. 

70.  For  France  see  Andre  Sayous,  Die  Konzentration  des  Bankverkehrs 
in  Frankreich  in  the  Bank-Archiv,  vol.  Ill,  No.  8,  of  May  3,  1904,  Table  I, 
p.  129. 

71.  Edgar  JafT6,  Das  englische  Bankwesen,  p.  30. 

72.  Edgar  Jaffe,   loc.   cit.,    p.    192. 

73.  Thus  the  capital  of  the  Joint  Stock  Banks  in  Great  Britain  during 
the  years   1900-1905,   rose  from   £76,000,000  to   £79,500,000,   in  round 
figures,  while  their  number  fell  from  83  to  62. 

74.  See  above,  p.  605. 

75.  See  p.  607  and  following  of  the  text  and  notes  thereto. 

76.  The  several  capital  increases  of  the  Darmstadter  Bank  during  the 
second  epoch  were  as  follows:  Up  to  1880  to  60,000,000  marks,  up  to  1889 
to  80,000,000  marks,  up  to   1898  to   105,000,000  marks,  up  to   1902   to 
132,000,000  marks,  up  to  1904  to  154,000,000  marks.     (The  last-named 
figure  has  been  maintained  to  date.) 

77.  The  several  capital  increases  of   the   Berliner  Handelsgesellschaft 
during  the  second  epoch  were  as  follows:  Up  to  1880  to  30,000,000  marks  (in 
1882  reduced  to  20,000,000  marks),  up  to  1886  to  30,000,000  marks,  up  to 
1887  to  40,000,000  marks,  up  to  1889  to  50,000,000  marks,  up  to  1891  to 
65,000,000  marks,  up  to  1896  to  80,000,000  marks,  up  to  1899  to  90,000,000 
marks,  up  to  1903  to  100,000,000  marks,  up  to  1908  to  110,000,000  marks. 
(The  last-named  figure  has  been  maintained  to  date.) 

78.  The  several   capital   increases  of   the   Disconto-Gesellschaft  during 
the  second  epoch  were  as  follows:  Up  to  1880  to  60,000,000  marks,  up  to 
1889  to  75,000,000  marks,  up  to  1898  to  115,000,000  marks,  up  to  1899 
to   130,000,000  marks,  up  to  1902  to   150,000,000  marks,  up  to  1904  to 
170,000,000  marks.     (The  last-named  figure  has  been  maintained  to  date.) 

866 


The     German     Great    Banks 


79.  The  several  capital  increases  of  the  A.  Schaaffhausen'scher  Bank- 
verein  during  the  second  epoch  were  as  follows:  Up  to  1880  to  36,000,000 
marks,  up  to  1891  to  48,000,000  marks,  up  to  1895  to  60,000,000  marks, 
up  to  1897  to  75,000,000  marks,  up  to  1899  to  100,000,000  marks,  up  to 

1904  to  130,000,000  marks,  up  to  1908  to  145,000,000  marks.     (The  last- 
named  figure  has  been  maintained   to  date.) 

80.  The   several    capital   increases    of   the   Mitteldeutsche    Kreditbank 
during  the  second  epoch  were  as  follows:  Up  to  1880  to  30,000,000  marks, 
up  to  1897  to  36,000,000  marks,  up  to  1899  to  45,000,000  marks,  up  to 

1905  to    54,000,000    marks. 

Assuming  an  original  capital  of  5,000,000  thalers  (=15,000,000  marks) 
instead  of  8,000,000  thalers  (since  3,000,000  thalers  remained  in  the  port- 
folio of  the  bank),  a  nearly  fourfold  increase  within  the  period  may  be 
figured  out. 

81.  In  Austria  the  earning  capital  (share  capital  plus  surplus,  accept- 
ances, deposits  and  credits  on  current  account  (Kreditoren)  of  all  Austrian 
joint-stock  and  provincial  banks  (Landesbanken)  at  the  end  of  1902  was 
in  round  figures  7,500,000,000  crowns,  of  which,  it  is  true,  the  Austro- 
Hungarian  Bank  was  credited  with  about  2,432,000,000  crowns,  and  the 
Kreditanstalt  with  494,000,000  crowns.     Out  of  60  banks,  6  possessed  in  the 
aggregate  more  than  60  per  cent  of  the  total  capital.     At  the  end  of  1908, 
the  following  Austrian  banks,  which  since  1905  have  also  greatly  increased 
the  number  of  their  branches,  showed  the  following  share  capitals : 


Capital  at 
end  of 
1908. 

Capital  in  year  of 
foundation. 

Year  of 
founda- 
tion. 

i    K     K     Priv      Kreditanstalt     fur 

Million 
crowns. 

Handel  und  Gewerbe. 
2.  K.  K.  Priv.  Osterreichische  Boden- 
kreditanstalt. 
3    K  K  Privilegierte  Osterreichische 

45 

7,200,000  crowns  

1864 
1880 

Landerbank. 

1869 

5.  Anglo-Osterreichische  Bank  
6.  Niederosterreichische    Bscomte- 
gesellschaft. 
7    Unionbank 

60 
60 

7° 

12,000,000  crowns  
10,461,000  crowns  

2  ooo  ooo  crowns  

1853 
1853 

1870 

a  Beginning  with   1864  only  60,000,000  florins. 

The  great  Hungarian  banks,  too,  have  recently  increased  their  share 
capitals  very  considerably  (in  part  also  the  number  of  their  branches),  in 
particular  the  following:  i,  Ungarische  Allgemeine  Kreditbank,  capital 
increased  to  60,000,000  crowns;  2  Osterreichisch-Ungarische  Commercial- 
bank,  capital  increased  to  42,000,000  crowns;  3,  Ungarische  Escomte-  und 
Wechslerbank,  capital  increased  to  40,000,000  crowns. 


867 


National    Monetary     Commission 

In  France,  the  following  increases  of  share  capital  took  place  between 
1870  and  the  end  of  1908:  Credit  Lyonnais  (with  43  agencies  in  Paris,  9 
in  the  suburbs  of  Paris,  174  in  French  provincial  towns  and  in  Algeria), 
from  20,000,000  to  250,000,000  francs;  Comptoir  national  d'Escompte  de 
Paris  (with  35  bureaux  de  quartiers  in  Paris,  14  agencies  in  the  suburbs 
and  150  agencies  in  the  provinces),  from  50,000,000  to  150,000,000  francs; 
Credit  industriel  et  commercial  (with  30  succursales  in  Paris,  3  in  the 
suburbs  and  i  agency  in  London),  from  15,000,000  to  100,000,000  francs; 
Societe  generate  pour  favoriser  etc.  (with  88  succursales,  agencies  and 
bureaus  in  Paris  and  suburbs,  637  agencies  in  the  provinces,  and  one 
agency  each  in  London  and  Saint  Sebastian,  Spain),  from  60,000,000  to 
300,000,000  francs. 

82.  The  several  increases  of  the  Deutsche  Bank  were:  Period  ending 
1880    to    45,000,000,    1 88 1    to   60,000,000,    1888   to   75,000,000,    1895    to 
100,000,000,  1897  to  150,000,000,  1902  to  160,000,000,  1904  to  180,000,000, 
1905  to  200,000,000  marks;  amount  unchanged  since  then. 

83.  The  several  increases  of  the  Dresdner  Bank  were:  Period  ending  1880 
to  15,000,000,  1 88 1  to  24,000,000,  1883  to  36,000,000,  1887  to  48,000,000, 
1889   to   60,000,000,    1892    to   70,000,000,    1895    to    85,000,000,    1897    to 
110,000,000,  1899  to  130,000,000,  1904  to  160,000,000,  1907  to  180,000,000 
marks,  1910  to  200,000,000  marks. 

84.  The  several  increases  of  the  Commerz-  und  Disconto-Bank  were: 
Period  ending  1883  to  40,000,000,  1897  to  50,000,000,  1904  to  85,000,000 
marks;  amount  unchanged  since  then. 

85.  The  several  increases  of  the  National  bank  fur  Deutschland  were: 
Period  ending  1883  up  to  24,000,000,  1899  (after  reduction  to  21,000,000  and 
to  18,000,000)  to  27,000,000,   1890  to  36,000,000,   1895  to  45,000,000,   1898 
to  60,000,000,  1905  to  80,000,000  marks;  amount  unchanged  since  then. 

86.  See  also  p.  629  and  following  for  list  of  banks  and  private  banking 
firms  absorbed  by  provincial  banks  which  remained  independent.     For 
example,  the  Rheinisch-Westfdlische  Disconto-Gesellschaft  in  AacJien  (Aix- 
la-Chapelle)  alone  absorbed  a  total  of  7  banks  and  2  private  banking  con- 
cerns (4  banks  and  i  private  banking  concern  being  absorbed  in  a  single 
year,  1905);  see  p.  633  et  seq. 

87.  In  1909  the  Disconto-Gesellschaft  set  up  a  branch  in  Mainz,  to  take  the 
place  of  the  bankingfirm  of  Bamberger  &  Co.  in  Mainz,  which  it  had  absorbed. 

88.  In  1909  the  Deutsche  Bank,  without  absorbing  any  banking  estab- 
lishment, set  up  a  branch  in  Constantinople,  in  order  to  foster  and  develop 
the  manifold  relations  to  Turkey. 

89.  Paul  Wallich  (loc.  cit.,  p.  59  et  seq.)  says  that  fusion  was  "the  char- 
acteristic form  of  concentration"  in  German  banking  in  the  period  1880- 
1895.     I  am  unable  to  share  that  view,  even  as  regards  the  period  named. 
Concerning  a  bank  which  ceased  to  exist  not  long  after  its  establishment, 
it  soon  became  a  common  saying  at  the  Bourse  that  the  shares  were  bought 
and  sold  "per  disappearance." 

90.  Such  is  the  case  of  the  Berliner  Bank,  which  had  been  unable  fully  to 
attain  its  purpose,  namely  to  attract  the  credit  business  of  the  class  of 
small  traders. 

868 


The     German     Great     Banks 


91.  Such  is,  for  example,  the  case  of  the  Hessische  Notenbank  under  the 
firm  name  of  Bank  fur  Siiddeutschland,  which,  by  reason  of  the  new  bank- 
ing law,  was  no  longer  able  to  attain  its  aims  as  fully  as  had  been  intended 
and  was  in  fact  requisite.     Paul  Wallich  (loc.  cit.,  p.  78)  reports  the  absorp- 
tion of  six  other  former  note  banks  by  credit  banks.     Here  must  also  be 
mentioned  the  absorption,  in  1905,  of  the  Braunschweigische  Kreditanstalt 
(share  capital,  6,750,000  marks)  by  the  Braunschweigische  Bank  (share 
capital,  10,500,000  marks),  the  latter  absorbing  in  1906  also  the  banking 
firms  of  Hermann  Schoof  in  Helmstedt  and  Hugo  Rennau  in  Schoningen. 

92.  See  article:  " Zwangsf usionen "  in  the  Berliner  Tageblatt  (Handels- 
zeitung)  Jan.  15,  1906. 

93.  Thus  in  the  case  of  the  absorption  of  the  Anglo-Deutsche  Bank  by 
the  Dresdner  Bank  in  1892. 

94.  Rudolf  Kberstadt,  Depositenbankwesen  und  Scheckverkehr  in  Eng- 
land, op.  cit.,  p.  249.     Edgar  Jaffe  (loc.  cit.,  pp.  190-191)  thinks  on  the 
contrary  that  "  the  movement  has  been  slackening  since  the  beginning  of 
the  new  century." 

95.  Edgar  Jarfe",  loc.  cit.,  p.  191. 

96.  Karl  Mamroth,  Die  schottischen  Banken,  p.  10,  note  38. 

97.  Vossische  Zeitung,  Jan.  31,  1905;  see  Charles  J.  Bullock,  Concentra- 
tion of  Banking  Interests,  in  Atlantic  Monthly,  Aug.  1903. 

98.  See  C.  Stegemann,  Die  Entwicklung  des  franzosischen  Grossbank- 
betriebes  (Minister  in  Westfalen,  Theissing,  1908),  pp.  22-23,  2^,  39- 

99.  See  p.  869,  note  57. 

100.  This  refers  solely  to  the  share  capital,  not  to  reserves  nor  to  deposits 
of  all  kinds. 

101.  The   Rheinisch-Westfalische    Disconto-Gesellschaft    (share    capital 
80,000,000  marks,  17  branches,  see  p.  633),  which  was  enumerated  in  this 
connection  in  earlier  editions,  and  which  is  particularly  active  in  the  mining 
region  of  the  Rhineland  and  Westphalia,  I  no  longer  include  in  the  group  of 
the  Disconto-Gesellschaft  for  reasons  stated  on  p.  673. 

102.  The  Westdeutsche  Bank  vormals  Jonas  Cahn  in  Bonn,  having  in 
1904  been  absorbed  by  the  A.  Schaaffhausen'scher  Bankverein,   can  of 
course  not  be  separately  mentioned.     For  the  same  reason  the  Niederrhein- 
ische  Kreditanstalt  vormals  Peter  &  Co.  in  Krefeld  (fused  in  1904)  has  to  be 
omitted. 

103.  Georg   Tischert,    Filialsystem   und   Zentralisation   im    Bankwesen 
(Bank-Archiv  May  1903,  No.  8,  pp.  119-120). 

104.  Paul  Wallich,  Die  Konzentration  im  deutschen  Bankwesen,  1905, 
pp.  17-24  and  Table  II,  p.  19. 

105.  Jubilaumsbericht  der  Disconto-Gesellschaft  (Jubilee  report  of  the 
Disconto-Gesellschaft),  p.  208.     The  practice  of  setting   up  independent 
provincial  banks  at  the  locality  of  the  parent  bank  was  probably  prompted 
by  considerations  similar  to  those  which  as  early  as  1864  had  led  the  Darm- 
stadter  Bank  to  transform  its  branch  in  Mainz  into  a  commandite,  "in  order 
to  limit  the  number  of  institutions  that  might  directly  commit  the  bank." 


869 


National    Monetary     Commission 

106.  See  above  (Part  3,  chap.  2,  par.  4,  under  II). 

107.  In  the  first  period  (1848-1870)  and  at  the  beginning  of  the  second 
period  the  Darmstadter  Bank  took  the  lead  in  establishing  subsidiary 
companies  (Tochtergesellschaf ten) . 

1 08.  See  Supplement  VII. 

109.  In  the  case  of  the  domestic  subsidiary  companies  (Tochtergesell- 
schaf ten),  which,  as  appears  from  the  above  remarks,  have  of  late  been 
established  in  somewhat  larger  number,   several  institutions  have  occa- 
sionally established  them  by  joint  action,  in  order  to  lessen  some  of  the 
disadvantages  here  described. 

no.  The  formation  of  trust  companies  was  also  greatly  promoted  by 
paragraph  39  (now  41)  of  the  stock  exchange  act. 

in.  For  details  the  reader  is  referred  to  Max  Jorgens,  Finanzielle  Trust- 
gesellschaften  (Stuttgart  and  Berlin,  J.  G.  Cotta  Nachfolger,  1902);  Robert 
Liefmann,  Beteiligungs-  und  Finanzierungsgesellschaften,  (Jena,  Gustav 
Fischer,  1909)  p.  369  et  seq. 

112.  Even  in  these  cases,  however,  the  "closer  connection"  means  for 
the  most  part  that  the  bank  whose  shares  are  acquired  becomes  more  or 
less  subject  to  the  will  and  guidance  of  the  bank  acquiring  them.     Such 
connections  might  be  more  properly  called  "communities  of  protection" 
(Schutzgemeinschaften)    than    "communities   of  interest"    (Interessenge- 
meinschaften). 

A  very  peculiar  kind  of  community  of  interest  is  represented  by  the 
connection  established  in  1905  between  the  Imperial  Bank  of  Agricultural 
Credit  Societies  (Landwirtschaftliche  Reichsgenossenschaftsbank)  in  Darm- 
stadt and  the  Prussian  Central  Bank  of  Credit  Societies  (Preussische 
Zentralgenossenschaftskasse).  The  former,  which  was  by  far  the  weaker, 
was  permitted  to  acquire  shares  of  the  latter  to  the  amount  of  1,000,000 
marks,  in  exchange  for  which  it  surrendered  to  the  latter  the  business  with 
the  Prussian  Credit  Societies  (union  deposit  offices),  this  surrender  being 
deemed  an  equivalent  for  the  acquisition  of  the  shares. 

113.  See  Frankfurter  Zeitung  No.  216  (Aug.  6,  1905),  where  the  view  is 
expressed  that  the  estimate  of  2,000,000  marks  as  the  amount  of  shares  of 
the  Rheinisch-Westfalische  Disconto-Gesellschaft  held  by  the  Disconto- 
Gesellschaft  is  rather  high. 

For  details  concerning  the  Rheinisch-Westfalische  Disconto-Gesellschaft 
see  above,  p.  633. 

1 14.  A  similar  condition  exists  in  the  case  of  the  Schlesische  Handelsbank 
Aktiengesellschaft  in  Breslau  (formerly  Perls  &  Co.),  whose  share  capital 
at  its  foundation  or  rather  transformation  in  1905  was  acquired  in  part  by 
the  Berliner  Handelsgesellschaft  and  in  part  by  the  Disconto-Gesellschaft. 

115.  See  Otto  Jeidels,  p.  261. 

1 1 6.  In  the  first  edition  of  the  present  work  I  had  pointed  out  that 
differences  regarding  the  business  management  and  the  common  policy 
would  be  apt  to  arise.     The  Berliner  Jahrbuch  fur  Handel  und  Industrie 
(1908,  Vol.  I,  p.  261)  states,  I  do  not  know  on  what  grounds,  that  such 


870 


The     German     Great     Banks 

differences  did  manifest  themselves  in  the  classic  instance  of  the  Dresdner 
Bank-Schaaffhausen  alliance,  one  case  occurring  as  early  as  1904  in  regard 
to  the  Hibernia  nationalization  plan,  another  in  1908  in  regard  to  the 
occurrences  connected  with  the  International  Exploration  Company  Erke- 
lenz,  whose  shares  were  owned  for  the  most  part  by  the  A.  Schaaff- 
hausen'scher  Bankverein.  It  is  to  be  noted  that  industrial  communities  of 
interests,  too,  have  sometimes  been  terminated,  mostly  through  the  fusion 
of  the  contracting  parties.  Such  was  the  case  with  the  community  of 
interest  entered  into  in  1904  for  five  years  between  the  Bismarckhiitte 
and  the  Oberschlesische  Eisenindustrie  Aktiengesellschaft  in  Gleiwitz;  the 
oft-mentioned  community  of  interest  entered  into  in  1904  for  thirty-one 
years  between  the  Schalker  Gruben-  &  Hiitten-Verein,  the  Gelsenkirchener 
Bergwerks-Aktien-Gesellschaft  and  the  Eisenhuttenwerk  Rote  Erde 
Aktiengesellschaft  Aachen,  which  were  fused  in  1907;  the  community  of 
interest  entered  into  in  1905  for  thirty-five  years  between  the  firm  Arthur 
Koppel  and  the  Aktiengesellschaft  fur  Feld-  und  Kleinbahnbedarf  vormals 
Orenstein  &  Koppel  in  Berlin.  In  this  case,  too,  the  aliance  terminated  in 
fusion,  the  former  firm  being  merged  in  the  latter,  and  the  combined  enter- 
prise assuming  the  firm  name  of  Orenstein  &  Koppel,  Arthur  Koppel 
Aktiengesellschaft. 

117.  This  view  has  been  substantiated  since  the  first  edition  of  this 
book  in  1905,  while  in  industry  numerous  communities  of  interest  have 
meantime  been  entered  into,  such  as  the  great  communities  of  interest  in 
the  chemical  industry  described  on  pp.  72 1   et  seq.     See  Henry  Volcker, 
Vereinigungsformen  und  Interessenbeteiligungen  in  der  deutschen  Gross- 
industrie,  in  Schmoller's  Jahrb.  fur  Gesetzebung,  Band  XXXIII,  Heft  4, 
p.  1 1  et  seq. 

1 1 8.  Report  of  the  Bergisch-Markische  Bank  for  1897,  p.  3. 

1 19.  Paul  Wallich  (loc.  cit.,  p.  102)  rightly  refers  also  to  the  difficulties  from 
the  standpoint  of  taxation,  citing  a  passage  from  Jorgens,  Finanzielle  Trust- 
gesellschaften,  p.  75 :  "  Double  taxation,  which  is  likely  to  occur  in  the  case 
of  a  stock  company,  inasmuch  as  the  tax  is  laid  on  the  income  or  profits 
first  of  the  company  and  second  of  the  shareholder,  is  apt  to  become  triple 
taxation  when  one  stock  company  owns  the  other."     Again  Wallich  justly 
remarks  (loc.  cit.,  p.  no)  that  "in  banking,  the  permanent  participation 
represents,  in  principle,  the  same  degree  of  improvement  on  the  stock 
company  as  the  stock  company  does  on  individual  enterprise."     However, 
I  am  unable  to  agree  with  the  argument  he  advances  in  support  of  the 
last-mentioned  thesis,  because,  to  my  mind,  the  modern  stock  company  is 
characterized  by  the  fact  that   (contrary  to  the  opinion  expressed  by 
Wallich,  loc.  cit.,  p.  in)  the  stockholder  (aside  from  exceptional  cases), 
while  possessing  an  "interest  in  the  undertaking,"  does  not  possess  an 
"undertaker's  interest,"  especially  since  it  is  not  the  individual  stockholder 
but  the  aggregate  of  the  stockholders  that  has  to  be  regarded  as  the 
undertaker.     Now   this   aggregate,    though    perhaps   not   possessing   the 
capacity  to  undertake,  which  even  the  physical  undertaker  may  lack, 


871 


National    Monetary     Commission 

certainly  has  the  will  to  undertake,  as  appears  from  the  very  fact  that  it 
does  not  dissolve  the  enterprise  but  carries  it  on,  or  rather  causes  it  to  be 
carried  on.  Hence  the  assertion  recently  made  (for  example  by  Ad.  Gott- 
schewsky  in  his  interesting  and  stimulating  work  "  Ueber  die  Aktienform 
der  Unternehmung,"  in  Schmoller's  Jahrb.  31  Jahrg.  i  Heft,  p.  199  et  seq.), 
that  in  the  case  of  a  stock  company  there  is  no  undertaker  at  all,  must  be 
regarded  as  erroneous. 

1 20.  Toward  the  end  of  1904  the  number  of  commandites  had  decreased 
by  two  (see  ist  ed.,  p.  211). 

121.  See  Jubilee  Report  of  the  Disconto-Gesellschaft,  pp.  204-205. 

122.  See  Report  of  Darmstadter  Bank,  1871,  pp.  12-13. 

123.  See  Model,  pp.  75-76. 

124.  See  Loeb,  cited  by  Model,  p.  168. 

125.  However,  on  looking  into  the  details,  we  find  that  the  conditions 
are  entirely  different.     Among  the  great  banks,  the  Dresdner  Bank  has  the 
largest  number  of  branches  (14). 

126.  To  this  must  be  added  4  branches  of  the  Westfalisch-Lippische 
Vereinsbank,  a  subsidiary  company  of  the  A.  Schaaffhausen'scher  Bank- 
verein,  mentioned  in  Supplement  VII,  and  3  branches  of  the  Bayerische 
Disconto-  und  Wechselbank,  also  2  branches  of  the  Revisions-  und  Ver- 
mogens-Aktien-Gesellschaft,  as  well  as  8  branches  of  the  Bank  fur  Thiir- 
ingen  vormals  B.  M.  Strupp,  Aktien-Gesellschaft,  making  a  total  of  17 
branches.     This  does  not  change  the  general  statement  nor  the  average 
number  of  branches  per  allied  bank  (Konzernbank) . 

127.  In  the  United  States  the  obstacles  are  mainly  of  a  legal  nature. 

In  Austria,  too,  with  the  exception  of  the  Oesterreichisch-Ungarische 
Bank,  which  is  a  note  bank,  the  great  banks  have  hitherto  had  a  rela- 
tively small  number  of  branches.  The  Oesterreichische  Kreditanstalt  at 
the  end  of  1904  had  only  7  branches,  the  Wiener  Bankverein  4,  the  Oester- 
reichische Landerbank  2.  The  three  last  named,  however,  had  a  number  of 
exchange  offices  (Wechselstuben).  In  1905  the  branches  began  to  mul- 
tiply. According  to  the  Prager  Tageblatt,  December  27,  1905,  there  were  in 
Bohemia  alone,  at  the  end  of  1905,  not  less  than  31  branches  and  agencies 
of  Bohemian  banks  and  27  branches  and  agencies  of  Vienna  banks,  besides 
54  branches  and  sub-offices  (Nebenstellen)  of  the  note  bank  (Oesterreichisch- 
Ungarische  Bank).  In  1905-6  the  Wiener  Bankverein  alone  established 
branches  in  Marienbad,  Karlsbad  and  Pilsen,  which  were  to  be  followed  by 
others  in  Bozen  and  Meeran  and  in  Constantinople,  and  this  movement 
continued  in  subsequent  years. 

128.  Depositenbanken  und  Spekulationsbanken  (1902),  p.  62  et  seq. 

129.  Rudolf    Eberstadt,    Depositenbankwesen    und    Scheckverkehr    in 
England,  p.  248. 

130.  In  the  case  of  England,  however,  it  is  advisable  to  use  the  term 
banking  offices  (Bankstellen)  rather  than  the  term  branches,  since  the 
London  "branches"  at  any  rate  in  many  cases  resemble  our  deposit  offices 
rather  than  our  branches. 


872 


The     German     Great     Banks 


131.  Edgar  Jaffe,    Das   englische   Bankwesen,    p.    189.     See  preceding 
note. 

132.  For  the  period  up  to  1903  see  Andre  A.  Sayous,  Die  Konzentration 
des  Bankverkehrs  in  Frankreich,  Bank-Archiv,  3  Jahrgang,  No.  8,  May 
1904,  pp.  129-132,  especially  Table  I:  Number  of  agencies  and  branches  of 
French  credit  institutions  in  Paris  and  vicinity  (p.  129);    and  Table  II: 
Number  of  agencies  and  branches  of  the  French  credit  institutions  in  the 
province  (p.  130);  also  Vossische  Zeitung  of  Jan.  28,  1905. 

133.  See  Karl  Mamroth,  Die  schottischen  Banken,  loc.  cit.,  p.  20  et  seq. 

134.  See,  however,  note  130  on  p.  872. 

135.  The  words  "in  large  part"  were  added  in  deference  to  an  objection 
raised  by  C.  Hegemann  in  his  paper  Die  Entwicklung  des  franzosischen 
Grossbankbetriebes  (Minister  in  Westfalen,  1908,  Theissing),  p.  27.     The 
objection  must  be  regarded  as  well-grounded.     However,  he  himself  states 
(p.  94)  that  the  French  branches  of  the  credit  institutions  are  merely  instru- 
ments to  carry  out  the  orders  of  the  central  bank. 

136.  This  is  probably  the  reason  why  Andre"  A.  Sayous,  in  the  paper 
mentioned  in  the  above  note  132,  combines  agencies  and  branches. 

137.  Our  Reichsbank,  too,  had  at  the  end  of  1908  487  banking  offices 
(Stellen)   (in  1903  379).     See  Verwaltungsbericht  der  Reischsbank  fur  das 
Jahr  1909,  page  16.     In  Scotland  the  number  of  branches  rose  very  decid- 
edly in  1854,  because  the  stamp  tax  on  bank  notes  was  reduced  from  5  pence 
to  i  penny  (Karl  Mamroth,  loc.  cit.,  pp.  19-20). 

138.  Quoted  from  Somers,  The  Scotch  banks  and  system  of  issue,  Edin- 
burgh 1873.     (See  Karl  Mamroth,  loc.  cit.,  p.  27). 

139.  Die  Berliner  Grossbanken  in  den  Jahren  1895-1902  etc.,  p.  114. 

140.  For  details  see  Edgar  Jaffe",  Das  englische  Bankwesen,  pp.  184-85. 

141.  Ad.  Weber,  Depositenbanken  und  Spekulationsbanken,  p.  41. 

142.  The  income  tax  depends  on  the  legislation  of  the  various  states. 
The  legislation  of  Prussia,   for  example,  provides  that  stock  companies 
having  their  main  office  in  Prussia  and  branches  in  another  German  state 
are  taxed  in  Prussia  on  that  part  of  their  total  income  which  is  derived  from 
the  business  operations  of  the  establishments  located  in  Prussia. 

Similarly,  stock  companies  having  their  main  office  outside  of  Prussia 
but  possessing  branches  in  Prussia  are  subject  to  the  Prussian  income  tax 
on  that  part  of  their  total  income  which  is  derived  from  establishments 
located  in  Prussia. 

143.  Loc.  cit.,  p.  112. 

144.  On   this   account,    agencies,    as   contrasted  with  branches,  would 
doubtless  play  a  very  prominent  part  in  Germany  also,  but  for  the  peculiar 
reasons  mentioned  in  the  text.     From  a  business  point  of  view  it  would 
be  good  policy  to  begin  with  the  easier  form,  the  agency,  and  develop  it 
gradually,  as  business  increases,  into  the  more  substantial  and  important 
juridical  form,  the  branch.     With  this  view  some  banks,  for  example  the 
Pfalzische  Bank,  have  established  branches  which  they  called  "agencies" 


873 


National    Monetary     Commission 

or  "  deposit  offices"  or  "  deposit  and  exchange  offices  "  (Wechselstuben),  but 
which  had  to  be  recorded  as  branches. 

145.  Of  the  remaining  "agencies,"  the  majority  are  agencies  only  in 
name,  being  entered  in  the  trade  register  as  branches.     See  preceding  note. 

146.  Most  of  the  sums  in  question  are  in  fact  deposits,  because  in  Meck- 
lenburg, Oldenburg,  Schleswig-Holstein  and  Alsace-Lorraine,  more  than 
elsewhere  in  Germany,  especially  so  far  as  the  rural  population  is  con- 
cerned, it  is  customary  to  keep  available  funds  in  the  banks  as  deposits 
instead  of  investing  them.     These  sums  are  sometimes  quite  large  and  are 
often  kept  in  the  bank  for  a  long  time. 

147.  See  for  example  Ad.  Wagner,  Beitrage  zur  Lehre  von  den  Banken, 
Leipzig,  Leopold  Voss,   1857,  p.   164  et  seq.,  and  above,  pages    189  and 
following,  also  notes  thereto. 

148.  Grundriss  zum  Studium  der  politischen  Oekonomie  4th  ed.,  Jena, 
1902,  Gustav  Fischer,  p.  149. 

149.  Concerning  an  earlier  period  see  Ad.  Wagner,  loc.  cit.,  pp.  70-71  and 
others. 

150.  Edgar  Jaffe,  Das  englische  Bankwesen,  p.  189. 

151.  Hans  Gideon  Heymann,  loc.  cit.,  p.  132. 

Part  V. 

i .  For  details  see  W.  Sombart,  Der  moderne  Kapitalismus,  I,  pp.  553-569 ; 
Hans  Gideon  Heymann,  Die  gemischten  Gewerke  im  deutschen  Gross- 
Eisengewerbe  (Stuttgart  and  Berlin,  1904,  J.  G.  Cotta'sche  Buchhandlung 
Nachf.),  pp.  21 1  et  seq.  and  280  et  seq. 

2-.  Kontradiktorische  Verhandlungen  iiber  deutsche  Kartelle,  Heft  5, 
Supplement  I,  pp.  102  et  seq. 

3.  Hans  Gideon  Heymann,  loc.  cit.,  p.  211. 

4.  From  an  earlier  period  the  following  example  may  be  cited : 

The  A.  Borsig  machine  works,  which  as  early  as  1847  had  built  a  puddling 
and  rolling  mill  as  an  adjunct  to  the  machine  works,  thereupon  leased  coal 
and  ore  mines  and  in  the  sixties  erected  in  Upper  Silesia  other  puddling  and 
rolling  mills,  "  thus  developing  from  a  "  machine  factory"  into  a  great  mixed 
steel  plant,  through  the  systematic  annexation  of  establishments  supplying 
the  raw  material  and  half-finished  manufactures. ' '  (Hans  Gideon  Heymann, 
loc.  cit.,"  pp.  186-187).  A  multitude  of  other  examples  from  recent  times 
are  found  in  the  volume  of  Henry  Voelcker  cited  on  p.  871,  note  117. 

5.  For  details  concerning  these  highly  interesting  developments,  which 
however  are  beyond  the  scope  of  the  present  book,  the  reader  is  referred  to 
the  following  works : 

Robert  Liefmann,  Die  kontradiktorischen  Verhandlungen  iiber  deutsche 
Kartelle  (Conrad's  Jahrbiicher,  3  Folge,  Band  XXV,  p.  638  et  seq.),  1903. 

Idem,  Die  Verhandlungen  iiber  die  Roheisensyndikate  und  den  Halbzeug- 
verband  in  der  deutschen  Kartellenqu£te  (Conrad's  Jahrbiicher,  3  Folge, 
Band  XXVII,  p.  525  et  seq.),  1904. 


874 


The     German     Great    Banks 


Idem,  Kartelle  und  Trusts  (Stuttgart,  Ernst  Heinrich  Moritz),  1905;  see 
especially  p.  99  et  seq. :  Die  Weiterbildung  der  Kartelle. 

Idem,  Krisen  und  Kartelle  (Schmoller's  Jahrb.  Jahrg.  1902,  p.  66 1  et  seq. 
and  Schriften  des  Vereins  fur  Sozialpolitik,  Bd.  CXIII,  p.  261  et  seq. 

Idem,  Die  Weiterbildung  der  Unternehmungsformen  unter  dem  Einfluss 
der  Kartelle  (Deutsche  Wirtschaftszeitung,  i  Jahrgang,  Nr.  2,  3  and  4, 
January  and  February  1905). 

von  Landmann,  Die  amtlichen  Erhebungen  uber  das  deutsche  Kartell- 
wesen  (Annalen  des  Deutschen  Reichs,  1904,  Ns.  i,  2  and  4). 

Hans  Gideon  Heymann,  loc.  cit. 

See  also  Kontradiktorische  Verhandlungen  uber  deutsche  Kartelle, 
Heft  1-8,  Berlin  1903  and  1904  (Franz  Siemenroth),  especially  the  reports 
of  Regierungsrat  Voelcker  on  the  Rhenish- Westphalian  Coal  Syndicate, 
H.  I  (session  of  26-27  Feb-  1902)  pp.  25-47  and  p.  275  et  seq.  note  (List  of 
syndicate  coal  mines  acquired  by  other  coal  mines  or  smelting  works),  and 
Heft  5 :  Report  on  the  cartel  movement  in  the  German  iron  industry  (also 
published  separately),  and  Supplement  I:  Betriebsvereinigungen  in  der 
deutschen  Eisenindustrie,  page  102  et  seq. 

6.  See  Robert  Liefmann,  Die  kontradiktorischen  Verhandlungen  etc.,  p. 

544- 

7.  Ibidem,  pp.  642-645. 

8.  It  is  well  known,  of  course,  that  some  individual  electrical  firms,  for 
example  the  A.  E.  G.  (Allgemeine  Elektrizitats-Gesellschaft)  have  for  many 
years  kept  large  balances  in  their  banks. 

9.  Completely  absorbed  by  the  Elektrizitats- Aktien-Gesellschaf  t  vormals 
W.  Lahmeyer  &  Co.,  the  absorption  taking  effect  on  September  i,  1902.     In 
May  1905  the  manufacturing  section  of  the  Aktiengesellschaft  vormals  W. 
Lahmeyer  &  Co.  was  united  with  the  firm  Felten  &  Guilleaume  Carlswerk 
Aktien-Gesellschaf t  in  Muhlheim  am  Rhein,  which  for  that  purpose  increased 
its  share  capital  from  36,000,000  to  55,000,000  marks.     The  united  com- 
panies bear  the  name  "Felten  &  Guilleaume-Lahmeyer  Werke  Aktien- 
Gesellschaf  t.'' 

10.  In   1898  the  Schaaffhausen'scher    Bankverein   left  the  Schuckert 
group  and  joined  the  Loewe  group  (Union-Elektrizitatsgesellschaft). 

11.  Particular  mention  may  be  made  here  of  the  remarkable  progress 
recently  achieved  in  the  production  of  dyes,  perfumes,  artificial  silk,  the 
extraction  of  nitrogen  from  the  air,  the  manufacture  of  new  explosives,  of 
materials  needed  in  aerial  navigation,  the  discovery  of  prophylactic,  anaes- 
thetic and  soporific  remedies,  and  last  but  not  least  the  transmutation  of 
metals,  and  even  of  elements,  or  substances  formerly  regarded  as  elements. 

12.  The  discussion  here  follows  in  the  main  L.  Mueffelmann,  Les  ententes 
dans  1'industrie  chimique  Allemande  (Revue  economique  internationale, 
Vol.  Ill  No.  4  December  15  to  20,  1904,  pp.  882-890);  a  few  errors  are 
here  corrected. 

13.  Besides  those  enumerated  in  the  text  mention  should  be  made  of 
the  Farbwerk  Muhlheim  formerly  A.  Leonhardt  &  Co.  in  Muhlheim;  Kalle  & 


875 


National    Monetary     Commission 

Co.  in  Biebrich  (now  part  of  the  combined  Hochster  Farbwerke-Cassella) ; 
K.  Oehler  in  Offenbach  on-the-Main  (now  absorbed  by  the  Chemische 
Fabrik  Griesheim-Elektron} . 

14.  See  Otto  Jeidels,  op.  cit.  pp.   123-125,  where  illustrations  are  also 
given.     See  also  p.  125. 

15.  Op.  cit.,  p.  122. 

16.  Hans  Gideon  Heymann,  op.  cit.,  p.  43. 

17.  Ibid.,  p.  4,  62. 

18.  Ibid.,  p.  72. 

19.  Ibid.,  pp.  85-94. 

20.  Ibid.,  pp.  107-8 

21.  Ibid.,  p.  119. 

22.  Ibid.,  p.  199. 

23.  Ibid.,  p.  204 

24.  See  Ludwig  Eschwege,  Revolutionierende  Tendenzen  im  deutschen 
Eisengewerbe  (Revolutionizing  Tendencies  in  the  German  Iron  Industry) 
in  die  Bank,  Apr.,  1909,  pp.  313-318  and  "Ladon"  in  the  Zukunft,  Apr.  3, 
1909,  p.  26. 

25.  Thyssen  keeps  aloof  from  the  great  banks  that  have  hitherto  been 
dominant  in  the  Lorraine-Luxemburg  district,  neither  has  he  developed  closer 
relations  to  the  Darmstadter  Bank,  which  founded  the  above  mentioned 
works  or  to    the  A.  Schaaffhausen'scher  Bankverein  which  reorganized, 
financed  and  improved  the  technical  outfit  of  the  Lorraine  furnace  com- 
pany Aumetz-Friede  (This  company  was  merged  in  1903  with  the  Fentscher 
Huttenaktienverein  and  the  Gewerkschaft  Crone.) 

Stinnes  too  at  first  had  only  a  few  minor  bank  connections  in  this  dis- 
trict, chiefly  through  his  directorship  in  the  Mittelrheinische  Bank  and  his 
relations  to  Spaeter  &  Co.  This  may  have  been  the  reason  why  he 
gladly  availed  himself  of  the  opportunity  in  1901  to  secure  a  strong  position 
in  this  district  by  entering  the  directorate  of  the  Deutsch-Luxemburgische 
Bergwerks-  und  Hutten-Aktiengesellschaft. 

Part  VI 

1.  For  certain  reservations  to  be  made  here  see  above,  p.  527  et  seq.  and 
particularly  pp.  535  and  536. 

2.  For  the  future  there  is  a  possibility  of  combinations,  which  would  at 
least  lead  to  a  saving  of  taxes. 

3.  Conditions  in  England  are  evidently  similar.     For  these  see  John 
Cockburn  Macdonald,  The  Economic  Effects,  National  and  International, 
of  the  Concentration  of  Capital  in  Few  Controlling  Hands.     (The  Institute 
of  Bankers,  Oct.,  1900,  Vol.  XXI,  pt.  VII,  pp.  371-3.) 

4.  Finanzielle  Trustgesellschaften,  p.  75. 

5.  With  reference  to  his  activity  as  a  curb  broker  (coulisse)  and  in  the 
arbitrage  field  see  above  pp.  620-621. 


876 


The     German     Great     Banks 


6.  Thus  Karl  Biicher  says  (Die  Entstehung  der  Volkswirtchaft,  3d  ed., 
1901,  p.  229):  Concentrated  demand  cannot  be  met  by  scattered  produc- 
tion.    Progress   of  concentration  in  demand   must  be  accompanied   by 
progress  of  concentration  in  industrial  production,  the  latter  causing  the 
disappearance  of  the  craftsman. 

7.  Karl  Biicher,  op.  cit.,  p.  235. 

8.  Otto  Jeidels  is  mistaken  in  his  opinion  with  reference  to  these  and 
the  majority  of  listed  bonds,  that  "industrial  bonds  yield  only  a  small 
return."     (Op.  cit.,  p.  55).     The  opposite  is  usually  the  case. 

9.  This  has  happened  in  England,  too,  but  only  in  a  few  cases.     (See 
Barclay  etc.) 

In  France  there  has  been  formed  from  among  the  private  bankers  the 
"Syndicat  des  Banquiers  de  la  province  francaise,"  and  the  Banque  de 
1' Union  Parisienne  (Mallet  freres,  Vernes  et  Cie.,  de  Neuflize  et  Cie,  etc). 

The  former  publishes  an  organ  of  its  own,  "La  France  economique  et 
financiere."  In  Germany  similar  combinations  have  been  proposed,  among 
others  by  Julius  Kohen  (Aschersleben),  in  the  Plutus  for  July  i,  1904,  "A 
Bankers'  Association  for  Cooperative  Buying,"  and  by  Ludwig  Eschwege 
in  Die  Hilfe  of  July  3,  1904,  No.  27. 

10.  See  W.  Sombart,  Die  deutsche  Volkswirtschaft,  2d  ed.,  p.  191. 

11.  According  to  the  excellent  and  exhaustive  report  (published  also  as 
reprint)  made  by  the  manager  of  the  Centralverband  des  Deutschen  Bank- 
und  Bankiergewerbes,  Wittner,  Counsellor-at-law  in  Berlin,  to  the  Third 
General  Convention  of  German  Bankers  at  Hamburg  in  September  1907, 
a  schedule  was  prepared  for  the  purpose  of  gathering  statistics  of  salaries 
paid  to  German  bank  employees,  also  regarding  the  living  conditions  of 
these  employees  and  their  families,  and   38,000   copies  of   this   schedule 
were  sent  to  about  4,000  banking  institutions  and  firms.     The  data  of  these 
schedule  were  worked  up  by  the  Central  Verband.     Of  the  total  number 
sent  out,  24,146  or  about  65  per  cent  were  returned  filled  out  by  1,247 
establishments  having  24,146  employees,  distributed  as  follows — 264  joint 
stock  banks  with  16,391  employees,  708  private  banks  with  5,938  employees 
and  275  cooperative  banking  institutions  with  1,817  employees. 

12.  Memorial  on  the  investigation  into  the  economic  condition  of  salaried 
employees  in  private  establishments  instituted  during  Oct.,  1903,  by  the 
organizations  of  salaried  employees  and  transmitted   to   the  Reichstag 
March  14,  1907. 

13.  According  to  an  article  on  Banking  and  Exchanges  by  Henry  Crosby 
Emery,  professor  of  political  economy  at  Yale  University  there  was  recently 
established  in  the  United  States  the  International  Banking  Corporation 
with  a  capital  of  $7,000,000,  with  the  intention  of  having  a  bank  with 
American  managers  and  employees,  and  American  customers.     It  was,  how- 
ever, impossible  to  find  Americans  trained  for  the  positions,  and  "today 
all  the  branch  managers  are  Englishmen,"  (in  Ernst  v.  Halle,  Amerika, 
seine  Bedeutung  fur  die  Weltwirtschaft  und  seine  wirtschaftlichen  Bezie- 
hutigen  zu  Deutschland,  insbes.  zu  Hamburg,  Verlag  der  Hamb.  Borsen- 


877 


National    Monetary     Commission 

halle  1905,  p.  344)  In  these  matters  it  is  not  always  true  that  where  there 
is  a  will,  there  is  a  way. 

14.  As  an  illustration  of  most  recent  occurrence  I  refer  to  the  day  of  the 
outbreak  of  the  Russo-Japanese  war. 

15.  This  and  the  following  quotations  are  from  Riesser  "Die  Notwendi- 
gkeit  einer  Revision  des  Borsengesetzes,"  Berlin,  1901,  Leonhard  Simion, 

PP-  42,  43- 

1 6.  See  Ernst  Loeb  in  the  Nationalzeitung  of  Apr.  18,  1904,  No.  244. 

17.  Thus  for  example  Eschenbach  in  the  Proceedings  of  the  Verein  fur 
vSozialpolitik  of  September  16,  1903,  Schriften,  CXIIT. 

1 8.  See  above  p.  97  et  seq.     The  proportion  of  the  population  assessed 
for  the  income  tax  was  in  1904  37.1  percent  of  the  total  population;  in  1903, 
35.9  per  cent,  and  in  1896  only  29.3  per  cent. 

19.  Thus  Ludwig  Pohle,  Deutschland  am  Scheidewege  (Germany  at  the 
Parting  of  the  Roads)  Leipzig,  B.  G.  Teubner,  1902,  p.  199,  Cf.  also  his 
polemic  (ibid.,  pp.  197-198)  against  Dietzel's  theory  that  wages  and  the 
prices  of  grain  have  a  tendency  to  vary  in  opposite  directions,  a  view  wrhich 
lam  neither  able  to  share. 

20.  In  his  very  interesting  rectoral  address  of  Jan.  26,  1910,  on  "The 
Development  of  the  Iron  Industry  in  Germany,"  (p.  10)  Muthesius  cites  the 
official  reports  of  the  Krupp  consumers'  institution.     According  to  these 
reports  "  there,  has  been  no  increase  worth  mentioning  during  the  last  twenty 
years  in  the  prices  of  the  leading  commodities  entering  into  the  cost  of  living." 
However  this  very  gratifying  statement  must  be  used  with  caution,  for 
conditions  there  are  undoubtedly  out  of  the  ordinary. 

,  21.  Walter  Troeltsch  "tiber  die  neuesten  Veranderungen  im  deutschen 
Wirtschaftsleben"  (On  some  recent  changes  in  German  Economic  Life) 
Stuttgart,  1899,  p.  145. 

22.  Ibid.,  p.  147-148. 

23.  The  well-known  Hibernia  case  has  been  considered  as  one  of  such 
excesses,  for  the  reason  that  the  decline  of  the  government  offer  was  brought 
about  by  a  coalition  of  banks,  which  bought  up  the  stock.     This  is  however 
a  one-sided  and  incorrect  interpretation.     We  must  not  forget  that  among 
those  who  favored  the  government's  offer  there  were  two  great  banks,  viz. 
the  Dresdner  Bank,  and  the  A.  Schaaffhausen'scher  Bankverein.     Further- 
more, even  in  the  absence  of  the  concentration  movement  a  coalition  of 
banks  might  be  formed  for  a  specific  purpose.     Moreover,  any  one  of  the 
allied  great  banks  was  sufficientl}  powerful  by  itself  to  buy  up  enough  shares 
to  bring  about  the  refusal  of  the  government's  offer. 

24.  Max  Sering  says,    "The   question   of   supplanting  our  imports  by 
domestic  production,  must  be  answered  absolutely  in  the  negative.     If  this 
is  so,  we  must  export  on  a  scale,  that  will  enable  us  to  pay  for  those  articles 
("  Handels- und  Machtpolitik,  Vol.  II,  pp.  38-39  Stuttgart,  J.  G.  Cotta's 
Nachfolger,  1900).     Sering  goes  somewhat  too  far,  at  least  as  regards  tropi- 
cal products,  for  these  we  may  hope  to  draw  in  increasing  quantities  from 


878 


The     German     Great     B 


a  n 


our  colonies.     It   may   also   prove  possible   to   reduce  considerably  our 
imports  of  agricultural  products. 

25.  Thus  the  cartels  may  be  required  to  submit  their  by-laws  and  certain 
kinds  of  resolutions  (as  for  example  those  relating  to  export  premiums) 
also  to  answer  inquiries  and  to  publish  certain  infofmation.     Schrnoller's 
proposal,  that  they  be  required  to  submit  all  of  their  more  important  reso- 
lutions,   would   prove   impracticable   owing   to   the   indefmiteness   of  his 
formula,  if  for  no  other  reason.     See  paragraph  7  of  the  report  made  to  the 
general  meeting  ot  the  Verein  fur  Sozialpolitik  in  Mannheim,  Sept.  27,  1905, 
reprinted  in  Schmoller's  Jahrbuch  fur  Gesetzgebung  etc.  vol.  29,  No.  4,  pp. 
326  et  seq.,  and  particularly  p.  362). 

26.  On  this  point   cfr.   the  very  instructive  section  in   Paul  Wallich, 
Liquidation  of  Banks  ("  Entgrundungen),  op.  cit.,  pp.  34-48. 

27.  Schriften  des  Vereins  fur  Sozialpolitik,  LXI,  pp.  183-184. 

28.  Heinrich  Waentig,   Industriekartelle  und  Trusts  und  das  Problem 
ihrer  rechtlichen  Regelung  (Industrial  Cartels  and  Trusts — The  Problem  of 
their  legal   regulation)     Schmoller's  Jahrb.  f  Gesetzgebung  etc.,  vol.  25 
1901,  No.  4,  p.  19. 


879 


APPENDICES. 


90311°— ii 57  88 1 


APPENDIX  I. 

BIBLIOGRAPHY. 
A.  NATURE  AND  DEVELOPMENT  OF  THE  CREDIT  BANKS. 

[To  page  26.] 

1870.  Ad.  Wagner,  Banken  und  Bankwesen  in  H.  Rentsch,  Handworterbuch 
der  Volkswirtschaf  tslehre,  2 .  Ausgabe,  p.  80-9 1 . 

•1880.  Felix  Hecht,  Bankwesen  und  Bankpolitik  in  den  siiddeutschen 
Staaten,  1819  bis  1875  (Jena,  Gust.  Fischer). 

1890.  Walther  Lotz,  Die  Technik  des  deutschen  Emissionsgeschafts  (Leip 

zig,  Duncker  und  Humblot). 

-  Heinr.  Saltier,  Die  Effektenbanken  (Leipzig,  C.  F.  Winter'sche  Ver- 

lagshandlung). 

1891.  Karl  v.  Lumm,  Die  Entwicklung  des  Bankwesens  in  Elsass-Loth- 

ringen    seit  der  Annexion  (Staatsw.  Studien,  herausg.  v.  Elster, 
Bd.  Ill,  Heft  7). 

1896.  Paul  Model,  Die  grossen  Berliner  Effektenbanken  (aus  dem  Nachlass 
des  Verfassers  herausg.  und  vervollstandigt  von  Ernst  Loeb)  (Jena, 
Gust.  Fischer). 

B.  Banck,  Geschichte  der  sachsischen  Banken  mit  Beriicksichtigung 

der  Wirtschaftsverhaltnisse  (Berliner  Diss.). 

1898.  Andr£  Sayous,  Concentration  du  trafique  de  banque  en  Allemagne 

(Journal  des  Economistes,  v.  15,  Dec.,  1898). 

Id.,  Les  banques  allemandes  en  cas  de  crise  ou  de  guerre  (Revue 

d'Economie  politique,  v.  1898). 

1899.  Nasse  u.  Lexis,  article:  Banken,  in  the  Handworterbuch  der  Staats- 

wissenschaften,  2d  ed.,  Vol.  II,  p.  132  ff. 

1900.  Ernst   Heinemann,  Die  Berliner  Grossbanken   an   der    Wende  des 

Jahrhunderts  (Conrad's  Jahrb.,  3.  Folge,  Bd.  XX,  p.  86-97). 

1901.  Andre"  Sayous,  Les  banques  de  d£p6t,  les  banques  de  credit  et  les 

society's  financieres  (Paris,  1901,  L.  Larose). 

Die  Disconto-Gesellschaft  1851-1901.     Denkschrift  zum  sojahrigen 

Jubilaum  (Berlin). 

1901.  H.  Fleischhammer,  Zentralisation  im    Bankwesen  in   Deutschland 

(Schmoller's  Jahrbuch  fur  Gesetzgebung,  Verwaltung  u.  Volks- 
wirtschaft,  24.  Jahrg.,  p.  241-269). 

1902.  Ad.    Weber,    Depositenbanken   und   Spekulationsbanken    (Leipzig, 

Duncker  &  Humblot). 

-  Felix  Hecht,  Die  Mannheimer  Banken  1870-1900  (Schmoller's  staats- 

und  sozialw.  Forschungen,  Bd.  XX,  Heft  6). 

883 


National    Monetary     Commission 

1903.  Otto    Warschauer,    Physiologic    der    deutschen    Banken    (Berlin, 

Wilhelm  Baensch). 

Ernst  Loeb,  Die  Berliner  Grossbanken  in  den  Jahren  1895-1902  und 

die  Krisis  der  Jahre  1900  und  1901  (Schriften  des  Vereins  Mr 
Sozialpolitik,  Bd.  CX,  und  Storungen  im  deutschen  Wirtschafts- 
leben,  Bd.  VI,  p.  81-319). 

Joh.  Plenge,  Griindung  und  Geschichte  des  Credit  mobilier  (Tubingen, 

Verlag  der  H.  Laupp'schen  Buchhandlung). 

Ad.  Weber,  Die  Rhein.-Westfal.  Provinzialbanken  und  die  Krisis 

(Schriften  des  Vereins  f.  Sozialpolitik,  Bd.  CX;  Storungen  im 
deutschen  Wirtschaftsleben,  Bd.  VI,  p.  321-372). 

Rich.  Ehrenberg,  Deutsches  Bankwesen.     Ruckblicke  und  Ausblicke 

(Deutsche  Rundschau,  29.  Jahrg.,  Heft  5,  Febr.  1903,  p.  295-301). 

1904.  Emil  Herz  (Ludwigshafen  a.  Rh.),  Die  Banken  der  Pfalz  und  ihre 

Beziehungen  zur  Pfalzer  Industrie  (Hirth's  Annalen  des  Deutschen 
Reichs,  1904,  No.  i,  p.  43-55  and  No.  2,  p.  113-145). 

Siegfried  Schreiber,  Schilderung  des  sachsischen  Lokalbankwesens 

(Inaugural -Dissertation).     Leipzig,  Druck  v.  Oskar  Brandstetter. 

.  Rich.  Rosendorff,  Die  deutschen  Banken  im  uberseeischen  Verkehr 

(Schmoller's  Jahrb.,  Bd.  XXVIII,  Heft  4,  p.  93-134). 

Alfred  Salzmann,  Ursprung  und  Ziel  der  modernen  Bankentwicklung, 

Dresden  (Dissert.). 

1905.  Ott6  Jeidels,  Das  Verhaltnis  der  deutschen  Grossbanken  zur  Indus- 

trie, mit  besonderer  Beriicksichtgung  der  Eisenindustrie  (in  den 
staats-  und  sozialwissensch.  Forschungen  v.  Schmoller  u.  Sering, 
Bd.  XXIV,  Heft  2,  Leipzig,  Duncker  &  Humblot),  especially 
Abschnitt  II,  Die  Entwicklung  der  Grossbanken. 

Albert  Blumenberg,   Die  Konzentration  im  deutschen  Bankwesen 

(Inaug. -Dissert.,  Leipzig,  Aug.  Hoffmann). 

Edgard  Depitre,  Le  mouvement  de  concentration  dans  les  banques 

allemandes  (Paris,  Arthur  Rousseau).  , 

1905.  Julius  Steinberg,  Die  Konzentration  im  Bankgewerbe  (Berlin,  Franz 

Siemenroth). 

Paul  Wallich,  Die  Konzentration  irn  deutschen  Bankwesen  (in  den 

Munch.  Volkswirtschaftl.  Studien,  herausg.  von  Lujo  Brentano  u. 
Walther  Lotz,  74.  Stuck),  Stuttgart  u.  Berlin,  J.  G.  Cotta'sche 
Buchhandl.  Nachf. 

1906.  Herm.  Schumacher,  Die  Ursachen  und  Wirkungen  der  Konzentra- 

tion im  deutschen  Bankwesen  (in  Schmoller's  Jahrb.,  Bd.  XXX, 
.        Heft  3,  p.  i-33i). 

Arthur  Feiler,  Das  Bankwesen  (in  v.  Halle:  Die  Weltwirtschaft,  I, 

Jahrg.  1906,  I.  Teil,  p.  116-140,  und  ib.,  Jahrg.  1907,  I.  Teil,  p  118- 
136). 

F.  von  Pritzbuer,  Bank-Kredit-  und  Griindungsverhaltnisse  (ib.,  I, 

Jahrg.  1906,  II.  Teil,  p.  189-200;  ib.,  Ill,  Jahrg.  1908,  II.  Teil,  p. 
173-178). 


884 


The     German     Great     Banks 


1906.  Richard  Rosendorff,  Le  Developpement  des  banques  allemandes  & 

l'6tranger  (Revue  £conomique  Internationale,  Sept.  and  Oct.,  1906). 

Georg  Schanz,  Banken  (Worterbuch  der  Volkswirtschaftslehre  von 

Ludwig  Elster,  2.  Aufl.,  1906,  p.  309-323). 

1907.  Robert  Franz,  Die  deutschen  Banken  irn  Jahre  1906  (Sonderabdruck 

aus  dem  Deutschen  Oekonomist). 

1908.  Rudolf  Kaulla,   Die  Organisation  des  Bankwesens  im  Konigreich 

Wurttemberg   in   ihrer   geschichtlichen   Entwicklung    (Stuttgart, 
Ferdinand  Enke). 

Robert  Franz,  Die  deutschen  Banken  im  Jahre  1907  (Sonderabdruck 

aus  dem  Deutschen  Oekonomist). 

-    Paul  Wallich,  Das  Bankwesen  (in  v.  Halle,  Die  Weltwirtschaft,  III, 
Jahrg.  1908,  I.  Teil,  p.  42-49). 

1908-9.  Andre  E.  Sayous,  Les  banques  allemandes  et  le  commerce  d'outre- 
mer  in  "  Bulletin  mensuel  de  la  Federation  des  Industriels  et  des 
Commercants  francais, "  vol.  5,  No.  52  and  No.  70  (under  the  title: 
"Pourquoi  et  comment  il  faut  former  en  France  des  banques 
d' exportation.  L/exemple  des  banques  allemandes  d'outre-mer"). 

1908.  Alfred  Lansburgh,   Das  deutsche  Bankwesen   (Berlin,   Bankverlag, 

1909). 

1909.  Georges  Diouritch,  L' expansion  des  banques  allemandes  &  1' Stran- 

ger (Paris,  Arthur  Rousseau). 
Rob.  Liefmann,  Beteiligungs-  und  Finanzierungsgesellschaften  (Jena, 

Gustav  Fischer,  1909). 
1909.  Herm.  Levy,  Monopole,  Kartelle  und  Trusts  in  ihren  Beziehungen 

zur    Organisation    der    kapitalistischen    Industrie  (Jena,  Gustav 

Fischer,  1909). 
Robert  Franz,  Die  deutschen  Banken  im  Jahre  1908. 


1909, 


B.  METHODS  OF  BANKING. 


I.    GENERAL,  TREATISES  AND  HANDBOOKS. 


Kurzgefasstes 


1871.  Alois  Bischof,  Das  Geld-,  Kredit-  und  Bankwesen. 

Lehrbuch.     Pest. 

1883.  Max  Wirth,  Handbuch  des  Bankwesens,  3.  Aufl.,  Koln. 
1891.  Bernhard    Gerothwohl,    Das    Bank-Geschaft,    Ein    Handbuch    fur 

Kaufleute  und  Kapitalisten,  2d  ed.  of  "  Das  Bankgeschaft  nach 

Einfiihrung  der  Markrechnung,"  Frankfurt  a.  M. 
1894.  Hans  Belohlawek,  Handbuch  des  Bank-  und  Borsenwesens.     Lehr- 

und  Hilfsbuch,  Stuttgart. 
1897.  Bondi,  Die  Berufspflichten  des  Bankiers  auf  Grund  der  neuesten 

Gesetzgebung. 
1901.  Andre  E.  Sayous,   Les  banques  de  dep6t,   les  banques  de   credit 

et  les  societ6s  financieres,  Paris. 
Jacob  Kautsch,  Handbuch  des  Bank-  und  Borsenwesens  fur  Bank- 

beamte,  Kaufleute,  Kapitalisten,  sowie  fur  den  Selbstunterricht, 

2.  Aufl.,  Berlin. 


885 


National    Monetary     Commission 

1901.  Henry  Warren,  Banks  and  their  customers,  4th  ed.,  London. 

1903.  R.  Beigel,  Handbuch  des  Bank-  und  Borsenwesens,  Leipzig. 

F.  Leitner,  Das  Bankgeschaft  und  seine  Technik,  Frankfurt  a.  M. 

-  Joh.  Fr.  Schar,  Technik  des  Bankgeschafts,  Berlin. 

1904.  Buchwald,  Die  Technik  des  Bankbetriebes.     Ein  Hand-  und  Lehrbuch 

des  praktischen  Bank-  und  Borsenwesens,  Berlin  (5.  Aufl.,  1909). 

1905.  L.  Voigt  und  A.  Doerr,  Handelsbetriebslehre,   2.  Teil,  Bankgeschaft 

und  gewerbliche  Unternehmungen;  Leipzig. 

1908.  Georg  Schweitzer,   Leitfaden  des  Bank-  und  Borsenwesens,  Leipzig, 

1909.  Bastian,  Banktechnisches  fur  junge  Juristen  und  Volkwirtschaftler. 

Bankbeamte  und  Kaufleute,  Stuttgart. 

Joh.  Fr.  Schar,  Die  Bank  im  Dienste  des  Kaufmanns,  Leipzig. 

II.    BOOKKEEPING,  CORRESPONDENCE,  INSPECTION. 

In  addition  to  those  mentioned  under  I: 

1903.  Brosius,  Lehrbuch  der  Bankbuchhaltung,  Leipzig. 

Muntendorf,  Defraudationsschutz,  Briinn. 

Forges,   Die  Kontrolle  bei  der  Manipulation  und  Buchfiihrung  in 

Banken  usw.,  Wien. 

1904.  Spielmann,  Lehrbuch  der  Bankkorrespondenz,  Berlin. 

1905.  Romer,    Die   Biicherrevisionspraxis  in   Deutschland   und   England, 

Berlin. 

1908.  Julius    Chenaux-Repond,     Einfuhrung    in    die    Bankbuchhaltung, 

Stuttgart. 

-  Schmidt,  Die  Bucher-  und  Bilanzrevision,  Wien. 

Beigel,  Theorie  und  Praxis  der  Buchfiihrungs-  und  Bilanzrevision, 

Dresden. 

1909.  Schwatzer,  Lehrbuch  der  Bankkorrespondenz,  Wien  und  Leipzig. 

III.    CURRENT   ACCOUNTS. 

1884.  J.  A.  Levy,  Der  Kontokorrentvertrag.     Herausgegeben  von  Riesser, 

Freiburg  i.  B.  und  Tubingen. 

1893.  Greber,  Das  Kontokorrentverhaltnis,  Freiburg  i.  B.  und  Leipzig. 
1897.  Franz  Kammer,  Der  Kontokorrentverkehr,  Miinchen. 

1901.  A.    C.    Widemann,    Theorie    und    Praxis    des    Bankkontokorrents 

(3.  Aufl.),  Basel. 

1902.  Josef  Mohr,  Der  Kontokorrentverkehr,  Berlin. 

1904.  Siegfried    Buff,    Das    Kontokorrentgeschaft    im    deutschen    Bank- 

gewerbe,  Stuttgart. 

J.  K.  Kreibig,  Die  Kontokorrentlehre,  Wien. 

1905.  Karl   Ziegel,  Die   hauptsachlichsten   Methoden   des   Kontokorrent- 

rechnens. 

1906.  A.  Bergmann,  Praktische  Kontokorrentlehre   Karlsruhe. 

1907.  Schmidberger,  Das  Kontokorrent.    Seine  Technik  und  seine  rechtliche 

Bedeutung,  Frankfurt  a.  M. 


886 


The     German     Great     Banks 

IV.    DEPOSITS,  CHECKS,  GIRO,  AND   CLEARING   SYSTEMS. 

i.  Descriptive  literature. 

1 88 1.  Carl  Berger,  Katechismus  des  Girowesens,  Leipzig. 

1883.  Georg  Siemens,  Die  Lage  des  Scheckwesens  in  Deutschland.     Referat, 

Berlin. 

R.  Koch,  Abrechnungsstellen  in  Deutschland  und  deren  Vorganger, 

Stuttgart. 

1884.  W.  Howarth,  Our  Clearing  System  and  Clearing  Houses,  London. 
1884.  v.  Stieglitz,  Wesen  und  Vorziige  des  Depositen-  und  Scheckverkehrs, 

Berlin. 

1886.  Heinrich  Rauchberg,  Der  Clearing-  und  Giroverkehr.  Ein  statis- 
tischer  Beitrag  zur  Kenntnis  des  volkswirtschaftlichen  Zahlungs- 
prozesses,  Wien. 

1888.  Franz  Bubenik,  Die  Technik  des  Giroverkehrs  bei  der  osterreichisch- 

ungarischen  Bank,  Wien. 

1889.  Hanausek,  Der  Scheck  im  Giroverkehr  der  osterreichisch-ungarischen 

Bank,  Wien. 

1894.  Adolf  Neumann-Hofer,  Depositengeschafte  und  Depositenbanken. 
Theorie  des  Depositenbankwesens,  Leipzig. 

1896.  J.  Kanit,  Die  Technik  des  Giroverkehrs,  Wien. 

1897.  Heinrich  Rauchberg,  Der  Clearing-  und  Giroverkehr  in  Oesterreich- 

Ungarn  und  im  Auslande,  Wien. 

1898.  Schinckel,  Reichsbank  und  Giroverkehr,  Hamburg 

1899.  Georg  Obst,  Theorie  und  Praxis  des  Scheckverkehrs,  Stuttgart. 

1900.  Bank  des  Berliner  Kassenvereins  1850-1900.     Denkschrift  zum  i. 

October  1900. 

1901.  Dunker,    Geldersparende    Zahlungsmethoden    im    heutigen    Baiik- 

verkehr  Deutschlands,  Miinchen. 

1907.  S.  Buff,  Der  gegenwartige  Stand  und  die  Zukunft  des  Scheckverkehrs 

in  Deutschland,  Miinchen. 

1908.  Proebst,  Die  Grundlagen  unseres  Depositen-  und  Scheckwesens. 

2.  Literature  on  the  subject  of  the  German  Check  bill. 

1908.  Riesser,  Bemerkungen  zum  vorlaufigen  Entwurf  eines  deutschen 
Scheckgesetzes,  Berlin. 

Hoppenstedt,  Der  Scheckgesetzentwurf  von  1907,  Berlin. 

3.  Commentaries  and  annotated  editions  of  the  text  of  the  Check  Act  of  March 

n,  1908. 
1908.  Apt.,  Berlin. 

-  Buff,  Stuttgart  und  Leipzig. 

-  Henschel,  Berlin. 

Kuhlenbeck,  Breslau  und  Leipzig. 

-  Lessing,  Miinchen. 

-  Merzbacher,  Miinchen. 

Schiebler,  Leipzig. 

887 


National     Monetary     Commission 

4.  Monographs  on  the  new  Check  Act. 

1908.  Conrad,  Handbuch  des  deutschen  Scheckgesetzes,  Stuttgart. 

Breit,  Pflichten  und  Rechte  des  Bankiers  unter  dem  Scheckgesetz, 

Leipzig. 

Helbing,  Der  Scheckverkehr  nach  dem  neuen  Recht,  Stuttgart. 

V.    BIU,   DISCOUNTING. 

1901.  Eduard  Deimel,  Der  Diskontmarkt,  2.  AufL,  Leipzig. 

1907.  W.    Prion,    Das   deutsche   Wechseldiskontgeschaft   rnit   besonderer 

Beriicksichtigung  des  Berliner  Geldmarktes,  Berlin. 

Heiligenstadt,  Der  deutsche  Geldmarkt  in  Schmoller's  Jahrb.,  Bd. 

xxxi,  p.  1539. 

VI.    REGULAR   BANK   CREDIT. 

1882.  W.  Schaefer,   Der  gewerbliche  Kredit.     Vom  privatokonomischen 

Standpunkte  fur  Techniker  und  angehende  Industrielle  dargestellt. 
Leipzig  und  Heidelberg. 

1883.  M.  Schraut,  Die  Organisation  des  Kredits,  Leipzig. 

1891.  H.  Jacoby,  Die  Krediterkundigung  nach  ihrer  wirtschaftlichen  und 

nach  ihrer  rechtlichen  Seite,  Berlin. 

1895.  W.  Schimmelpfeng,  Kaufmannische  Erkundigung,  Berlin. 

1902.  Eugen  Sutro,  Die  kaufmannische  Krediterkundigung,  Leipzig. 
1904.  Herzf elder,  Das  Problem  der  Kreditversicherung,  Leipzig. 

1909.  Hecht,    Die    Organisation    des   langfristigen    industriellen    Kredits 

(Veroffentlichungen  des  Mitteleuropaischen  Wirtschaftsvereins  in 
Deutschland,  Heft  6). 

VII.   SAFEKEEPING  OF  OUTSIDERS'  SECURITIES,  SAFE  DEPOSIT  VAULT  BUSINESS. 

1892.  Julian  Goldschmidt  und  Lesse.     Zur  Reform  des  Bankdepotwesens. 

Zwei  Vortrage,  Berlin. 

1896.  F.  Lusensky,  Gesetz  betr.  die  Pflichten  der  Kaufleute  bei  Aufbewah- 

rung  fremder  Wertpapiere,  Berlin. 

1897.  W.   Frhr.  v.   Pechmann,   Das  Reichsgesetz  iiber  die  Pflichten  der 

Kaufleute  bei  Aufbewahrung  fremder  Wertpapiere  etc.  vom  5. 
Juli  1896,  Erlangen. 
-    Riesser,  Das  Bankdepotgesetz  vom  5.  Juli  1896.     Aus  der  Praxis 

und  fur  die  Praxis.     2.  vollig  umgearb,  Aufl.,  1906,  Berlin. 
1899.  Franz  Schweyer,  Die  Bankdepotgeschafte  in  geschichtlicher,  wirt- 
schaftlicher  und  rechtlicher  Beziehung,  Miinchen. 

1903.  Wettstein,  Das  Kassenschrankgeschaft,  Bern. 

1908.  Gumbel,  Der  Stahlkammerfachvertrag  der  deutschen  Banken,  Berlin. 

VIII.    SECURITY   BROKERAGE   BUSINESS. 

1895.  A    Endemann,  Das  moderne  Borsenkommissionsgeschaft  im  Effek- 

tenverkehr,  Berlin. 
1899.  James  Breit,  Der  Selbsteintritt  des  Kommissionars  nach  dem  neuen 

deutschen  Handelsgesetzbuch 

888 


The     German     Great    Banks 

1908.  Weidemann,  Das  Kommissionsgeschaft.     Systematische  Darstellung 

der  Bank-  und  Warenkommission,  Rostock. 

1909.  James  Breit,  Das  Recht  der  Effektenkommission  (im  Zentralver- 

bandskommentar  zum  Borsengesetz,  see  under  ix). 

ix.  STOCK  EXCHANGE  BUSINESS. 
I.  Descriptive  literature. 

1876.  Willy  Becker,  Die.  praktische  Arbitrage,  Berlin. 

1882.  Alfred  Junckerstorff,  Die  Arbitrage.     Miinz-  und  Wahrungsverha.lt- 

nisse.     Das  Pramien-  und  Stellagegeschaft,  Berlin. 

1883.  Isidor  Szkolny,  Theorie  und  Praxis  der  Pramiengeschafte,  Frankfurt 

a.  M. 

1897.  Eugen  Hiilsner,  Die  Borsengeschafte  in  rechtlicher  und  volkswirt- 
schaftlicher  Beziehung,  Berlin. 

-  Adolf  Wachtel.  Pramien-,  Stellage-  und  Nochgeschafte,  Wien. 

-  Heinrich    Brosius,    Die    Geld-,    Wechsel-   und    Effekten-Arbitrage, 

Leipzig. 

-  Andre"  E.  Sayous,  Etude  e"conomique  et  juridique  sur  les  bourses 

allemandes  de  valeur  et  de  commerce,  Paris. 
1899.  Mayer,  Die  Effektenborse  und  ihre  Geschafte,  Wien. 

-  Georg  Bernhard,  Der  Verkehr  in  Wertpapieren.     Ein  Handbuch  fur 

alle  Interessentenkreise,  Berlin. 

1901.  Robert  Stern,  Die  Arbitrage  im  Bank-  und  Borsen  verkehr,  Leipzig. 
1903.  Paul  Wiener  und  Walter  Stoerk,  Praktische  Arbitragerechnungen, 

Leipzig. 

1908.  Max  Furst,  Pramien-,  Stellage-  und  Nochgeschafte,  Berlin. 

-  Bronzin,  Theorie  der  Pramiengeschafte,  Leipzig  und  Wien. 

Schneider-Dahlheim,  Usancen   der  Berliner  Fondsborse,   14.  Aufl., 

Berlin. 

1909.  Swoboda,  Die  Arbitrage  in  Wertpapieren,  Wechseln,  Munzen  und 

Edelmetallen.     Handbuch   des    Borsen-,  Miinz-  und  Geldwesens 
samtlicher  Handelsplatze  der  Welt,  13.  Aufl.,  neubearbeitet  und 

tvermehrt  von  Max  Furst,  Berlin. 
Saling's  Borsen- Jahrbuch  1908-09.     Ein  Handbuch  fur  Bankiers  und 
Kapitalisten,  32.  Aufl.,  Berlin,  Leipzig,  Hamburg. 


2.  Literature  on  stock-exchange  legislation  and  reform. 


1895.  Gustav  Cohn,  Beitrage  zur  deutschen  Borsenreform,  Leipzig. 
1896-97.  F.  J.  Pfleger  und  L.  Gschwindt,  Borsenreform  in  Deutschland, 

Stuttgart. 
1898.  Wiedenfeld,   Die  Borse  in  ihrer  wirtschaftlichen  Funktion  und  in 

ihrer  rechtlichen  Entwicklung  vor  und  unter  dem  Borsengesetz, 

Berlin. 
1900.  Riesser,  Die  handelsrechtlichen  Lieferungsgeschafte,  eine  Kritik  der 

Rechtsprechung  des  Reichsgerichts,  Berlin. 

889 


National     Monetary     Commission 

1902.  Verhandlungen  des  I.  Allgemeinen  Deutschen  Bankiertags  zu  Frank- 
furt a.  M.     Frankfurt  a.  M. 

Riesser,    Die    Notwendigkeit    einer    Revision    des    Borsengesetzes, 

Berlin. 

1902.  N.  Miiller,  Differenztheorie  und  Borsengeschafte,  Berlin. 

1903.  Denkschrift  betr.  die  Wirkungen  des  Borsengesetzes  vom  22.  Juni 

1896  und  der  durch  das  Reichsstempelgesetz  vom  14.  Juni  1900 
eingefiihrten  Borsensteuererhohung.  Herausgegeben  vom  Zen- 
tralverband  des  Deutschen  Bank-  und  Bankiergewerbes,  Berlin. 

G.  Wermert,  Borse,  Borsengesetz  und  Borsengeschaft,  Leipzig. 

1904.  Verhandlungen  des  II.  Allgemeinen  Deutschen  Bankiertags  zu  Ber- 

lin, Berlin. 

1904.  Neukamp,     Differenzgeschaft     und    Borsentermingeschaft    in    der 

Gesetzgebung  und  Rechtsprechung.  Herausgegeben  vom  Zentral- 
verband  des  Deutschen  Bank-  und  Bankiergewerbes,  Berlin. 

1907.  Verhandlungen   des  III.    Allgemeinen   Deutschen   Bankiertages  zu 

Hamburg,  Berlin  (Referate  von  Riesser  u.  Warburg). 

Riesser,  Stand  und  Aussichten  der  Borsengesetzreform,  Berlin. 

3.  Commentaries  and  annotated  text  editions  of  the  Stock-Exchange  Act. 

1908.  Apt,  Trumpler,  Weissbart,  5.  Aufl.,  Berlin. 

1908.  Hemptenmacher,  2.  Aufl.,  Berlin. 

1909.  Rehm,    Trumpler,    Dove,    Neukamp,    Schmidt-Ernsthausen,    Breit, 

herausgegeben  vom  Zentralverband  des  Deutschen  Bank-  und 
Bankiergewerbes,  mit  Vorwort  von  Riesser,  Berlin. 

X.   THE    SECURITY-ISSUING    (EMISSION)    AND    FINANCING    BUSINESS. 

1890.  W.  Lotz,  Die  Technik  des  deutschen  Emissionsgeschafts.     Anleihen 

Konversionen  und  Griindungen,  Leipzig. 
1902.  Max  Jorgens,  Finanzielle  Trustgesellschaften,  Stuttgart  und  Berlin 

1905.  E.  Leist,  Die  Sanierung  von  Aktiengesellschaften,  Berlin. 

1907.  G.   S.   Freund,    Die   Rechtsverhaltnisse  der  offentlichen   Anleihen, 

Berlin. 

1908.  E.  Wolff  und  F.  Birkenbiehl,  Die  Praxis  der  Finanzierung  bei  Errich- 

tung,  Erweiterung,  Verbesserung,  Fusionierung  und  Sanierung  von 
Aktiengesellschaften,  Berlin. 

C.  PERIODICALS  AND  NEWSPAPERS. 

Die  Bank,  Berlin  (ed.  Lansburgh). 

Bankarchiv,  Zeitschrift  fur  Bank-  und  Borsenwesen,  Berlin  (ed.  Riesser). 

Bankbeamtenzeitung,  Berlin. 

The  Bankers',  Insurance  Managers'  and  Agents'  Magazine,  London. 

The  Bankers'  Magazine,  New  York. 

Bankers'  Magazine  and  Statistical  Register,  New  York. 

Berichte  iiber  Handel  and  Industrie  Berlin. 


890 


The     German     Great     B 


a  n 


Berliner  Borsencourier. 

Berliner  Borsenzeittmg. 

Berliner  Jahrbuch  fur  Handel  und  Industrie. 

Berliner  Tageblatt. 

Blatter  fur  Genossenschaftswesen,  Berlin. 

Busch's  Archiv  fur  Theorie  und  Praxis  des  allgemeinen  deutschen  Handels- 
rechts. 

Deutsche  Monatsschrift  fur  Handel,  Schiffahrt  und  Verkehrswesen  (Ro- 
stock). 

Der  Deutsche  Okonomist,  Berlin. 

Deutsche  Wirtschaftszeitung,  Berlin. 

Deutsches  Handelsarchiv,  Berlin. 

Deutsches  Handelsblatt,  Berlin. 

L'Economiste  europden,  Paris. 

L'Economiste  francais,  Paris. 

Finanzarchiv  (Schanz),  Stuttgart. 

Frankfurter  Zeitung. 

Hamburger  Borsenhalle. 

Hamburger  Korrespondent. 

Hamburger  Nachrichten. 

Handel  und  Gewerbe,  Berlin. 

Hannoverscher  Kurier. 

Internationaler  Volkswirt,  Berlin. 

Jahrbuch  fur  Gesetzgebung,  Verwaltung  und  Rechtspflege  (Holtzendorff), 
Leipzig. 

Jahrbiicher  fur  Gesetzgebung,  Verwaltung  und  Volkswirtschaft  (Schmoller), 
Leipzig. 

Jahrbiicher  fur  Nationalokonomie  und  Statistik  (Conrad),  Jena. 

Journal  des  Economistes,  Paris. 

Journal  of  the  Institute  of  Bankers,  London. 

Kolnische  Zeitung. 

Kolnische  Volkszeitung. 

Merkur,  Berlin. 

Monatsschrift  fur  Aktienrecht  und  Bankwesen,  Berlin. 

Monatsschrift  fiir  Handelsrecht  und  Bankwesen,  Berlin. 

Moniteur  des  Inter£ts  materiels,  Bruxelles. 

Neue  Freie  Presse,  Wien. 

Pester  Lloyd. 

Plutus,  Berlin. 

Preussisches  Handelsarchiv,  Berlin. 

Reuter's  Finanz-Chronik,  London. 

Die  Sparkasse,  Berlin. 

Vierteljahrshefte  zur  Statistik  des  Deutschen  Reichs,  Berlin. 

Vierteljahrsschrift  fiir  Staats-  und  Volkswirtschaft  (Frankenstein),  Leipzig. 

Vierteljahrsschrift  fiir  Volkswirtschaft,  Politik  und  Kulturgeschichte, 
Berlin. 


891 


National    Monetary     Commission 


Volkswirtschaftliche  Wochenschrift  (Dorn),  Wien. 
Vossische  Zeitung. 

Wochenschrift  fur  Aktienrecht  und  Bankwesen,  Berlin. 
Zeitschrift  des  Konigl.  Statistischen  Bureaus,  Berlin. 
Zeitschrift  fur  das  gesamte  Aktienwesen,  Leipzig. 

Zeitschrift  fiir  das  gesamte  Handelsrecht,  begriindet  von  Goldschmidt,  Stutt- 
gart. 

Zeitschrift  fiir  die  gesamte  Staatswissenschaft,  Tubingen. 
Zeitschrift  fiir  die  deutsche  Volkswirtschaft  (Schuck),  Berlin. 
Zeitschrift  fiir  Kapital  und  Rente,  Berlin. 

Zeitschrift  fiir  Literatur  und  Geschichte  der  Staatswissenschaften,  Leipzig. 
Zeitschrift  fiir  Handelswissenschaft  und  Handelspraxis,  Leipzig. 

APPENDIX  II. 

Credit  banks  founded  during  the  years  184.8-1856. 
[To  page  45.] 


Location. 

Designation. 

Year  of 
found- 
ing. 

Paid-up 
share 
capital  at 
end  of  1857. 

Berlin 

Disconto-Gesellschaft  

185  1  - 

Marks. 

Do  
Breslau 

Berliner  Handels-Gesellschaft  
Schlesischer  B  ankverein 

1856 
1856 

II,  220,  000 

Coburg  
Darmstadt  (Berlin) 

Coburg-Gothaer  Credit-Gesellschaft.  .  .  . 
vBank  fiir  Handel  und  Industrie 

1856 
X8c  •? 

i,  700,  ooo 

Dessau  ... 

Creditanstalt  fur  Industrie  und  Handel 

i8<;6 

Eisleben  
Hamburg 

Eislebener  Disconto-Gesellschaft  
Norddeutsche  Bank 

1856 
1816 

600,  ooo 

Do  

Vereinsbank  . 

i8<6 

Cologne  
Leipzig  .  . 

A.  Schaaffhausen'scherB  ankverein.  .  .  . 
Allgemeine  Deutsche  Creditanstalt 

1848 
1856 

15,  561,000 

Muhlhausen  (Alsace)  .  . 
Oldenburg  . 

Comptoir  d'Escompte  de  Mulhouse.  .  .  . 

1854 
1845 

800,  ooo 

Strassburg  (Alsace)  .  .  . 

Strassburger  Bank  (Stahling)  

1852 

2,  400,  OOO 

Total  14  banks. 

183,  140,  ooo 

892 


The     German     Great     B 


a  n 


APPENDIX  III. 

German  credit  banks  in  i8j2.o> 
[To  page  188.] 


Location. 

Designation. 

Year  of 
founda- 
tion. 

Paid-up 
share 
capital 
at  end  of 
1872. 

Aix-la-Chapelle  
Do  . 

Aachener  Bank  fur  Handel  u.  Industrie.  . 
Aachener   Discontogesellschaft    (Rheini- 

1872 

7,000 

marks. 
2,400 

Aschaffenburg  

sche). 
Bankverein  Aschaffenburg. 

Augsburg 

Augsburger  Bank 

TQi-T 

Barmen  
Berlin 

Barmer  Bankverein,    Hinsberg,   Fischer 
&Co. 
Allgem  Bau-  u   Handelsbank 

1867 

I  2f  OOO 

Do    ... 

Allgem   Deutsche  Handelsgesellschaft 

Do  

Berliner  Bank  

Do  

Borsenbank  fiir  Maklergeschafte  

Do 

Berliner  Bankverein 

Do  

Borsen-Handels-Verein  .... 

600 

Do  
Do 

Centralbank  fiir  Industrie  u.  Handel  .... 
Commissions-  u   Maklerbank 

l87l 

22,  500 

Do  

Berliner  Commerz-  u  "Wechselbank 

Do  

Deutsche  Bank  

l87O 

Do 

Deutsche  Handelsbank 

1869 

Do 

Deutsche  Unionbank  .  .  . 

Do  

Disconto-Gesellschaft  

1851 

Do  

Deutsche   Genossenschaftsbank,    Sorgel, 

1865 

7i  500 

Do  
Do  

Parrisius  &  Co. 
Gewerbebank,  H.  Schuster  &  Co  
Generalbank  fur  Maklergeschafte  

1863 
1872 

18,  ooo 
3»  ooo 

Do 

Hamburg  -Berliner  Bank  . 

1872 

Do  
Do  

Berliner  Handelsgesellschaft  
Internationale  Handelsgesellschaft  

1856 

1871 

31.500 

5,  250 

Do 

Berliner  Lombardbank  .... 

1871 

i,  500 

Do 

Berliner  Maklerbank 

Do 

Maklervereinsbank 

1871 

2,  4OO 

Do 

Preussische  Creditanstalt  

1872 

15,  ooo 

Do  
Do  

Provinzial-Disconto-Gesellschaft  
Provinzial-Gewerbebank  

1871 
1872 

18,  ooo 
6,  ooo 

Do  

Vereinsbank,  Quistorp  &  Co  

1870 

7,  500 

Do  

Wechselstuben  A.-G  

1872 

4,  500 

Do.  . 

Berliner  Wechslerbank  .  . 

1871 

IS,  000 

oSee  Deutscher  Oekonomist  of  January  27,  1906  (Vol.  XXIV,  No.  1205),  which 
includes,  however,  note  banks,  mortgage  banks,  the  so-called  Baubanken,  Handels- 
banken,  and  Produktenbanken,  which  are  omitted  from  the  above  list.  The  latter 
includes,  on  the  other  hand,  the  so-called  M ' aklerbanken  (brokers'  banks).  This  made 
necessary  a  number  of  changes  in  the  table  of  the  Deutscher  Oekonomist 

The  dates  printed  in  heavy  type  indicate  that  the  respective  banks  were  founded 
during  the  fifties  of  the  nineteenth  century. 

893 


National    Monetary     Commission 


German  credit  banks  in  1872 — Continued. 


Location. 

Designation. 

Year  of 
founda- 
tion. 

Paid-up 
share 
capital 
at  end  of 
1872. 

Beuthen  (Upper  Sile- 
sia. 
Bielefeld  

Oberschlesische  Bank  fur  Handel  u.  In- 
dustrie. 
Westfalische  Bank  
Braunschweiger  Creditanstalt 

1872 

1868 
1871 

1,000 
marks. 
3.000 

6,  ooo 

Bremer  Bankverein  

1871 

Do 

Deutsche  Nationalbank  

1871 

Breslau 

Breslauer  Discontobank  

1870 

Do 

Breslauer  Maklerbank  

1871 

Do  

Provinzial-Maklerbank  

1872 

2,  4OO 

Do 

Maklervereinsbank 

1872 

Do 

Breslauer  Wechslerbank  

1871 

Do 

Provinzial-Wechslerbank  

1872 

Do       .... 

Schlesischer  Bankverein  

1856 

22     500 

Do  

Schlesische  Vereinsbank  

1872 

7,  200 

Bromberg 

Ostdeutsche  Wechslervereinsbank  

1872 

Cassel 

Hessische  Bank  

1871 

Chemnitz  

Chemnitzer  Bankverein  

1871 

3  ,  ooo 

Coburg    

Coburg-Gothaer  Credit-Gesellschaft  

1856 

Bank  fur  Rheinland  u  Westfalen 

1871 

Do 

Rheinische  Effektenbank  

1872 

Do  

Cologne  (Berlin)  
Cologne  
Cottbus 

Rheinisch-Westfalische  Genossenschafts- 
bank. 
A.  Schaaffhausen'scher  Bankverein  
Kolner  Wechsler-  u.  Comm.-Bank  
Niederlausitzer  Bank.  . 

1872 

1848 
1871 
1871 

I,  500 

48,  ooo 
3.  ooo 

Cref  eld  

Bankverein  von  Gebr.  Peter  &  Co  .... 

1862 

Danziger  Bankverein 

1871 

Darmstadt  (Berlin) 

Bank  fur  Handel  u   Industrie  .  .  . 

1853 

Dessau  

Creditanstalt  fur  Industrie  u.  Handel 

1856 

I  800 

Dresden  (Berlin) 

Dresdner  Bank 

1872 

Dresden  

Dresdner  Handelsbank  

1872 

Do  

Dresdner  Wechslerbank  

1872 

6  ooo 

Do    .... 

Sachsischer  Bankverein 

1872 

Do  

Sachsische  Creditbank  

1871 

Do 

Sachsische  Discont(Lomb  )-Bank 

1868 

Eisleben  

Eisleber  Disconto-Gesellschaft   . 

1856 

Elberfeld  

Bergisch-Markische  Bank  

1871 

8   100 

Do  

Elberfelder  Disconto-  u    Wechslerbank 

1872 

Do  

Elberfelder  Handels-Gesellschaft  

1872 

i  ,  200 

Emden  

Emder  (Genossenschafts)  Bank 

1867 

167 

Erfurt  

Thuringer  Bankverein  

1871 

4.  500 

Essen.  . 

Essener  Creditanstalt  .  . 

1872 

0,000 

894 


The     German     Great    Banks 


German  credit  banks  in  1872 — Continued. 


Location. 

Designation. 

Year  of 
founda- 
tion. 

Paid-up 
share 
capital 
at  end  of 

1872. 

Frankfurt  a.  M  

Frankfurter  Bankverein  

1870 

1,000 
marks. 

Do           

Deutsche  Creditbank  .  . 

1872 

,000 

Do  

Deutsche  Effekten-  u.  Wechselbank 

1872 

Do  

Deutsche  Handels-Gesellschaft  

1872 

12,000 

Do 

Deutsche  Vereinsbank 

1871 

9,oo 

Do       

Osterreichisch-Deutsche  Bank 

1871 

Do  

Frankfurter  Wechslerbank  

1871 

Freiberg  i   S 

Vorschussbank 

1870 

Geestemiinde    .  .  . 

Geestemiinder  Bank  

1872 

Gera    

Geraer  Handels-Creditbank  

1872 

Gorlitz  
Griinberg  in  Silesia  .  .  . 
Halle      .               .... 

Gorlitzer  Vereinsbank  
Niederschlesischer  Kassenverein  
Hallescher  Bankverein  

1872 
1868 
1866 

2,  40O 

3.000 

Do  

Hallesche  Creditanstalt  

1872 

2     IOO 

Hamburg 

Waaren-Creditanstalt           .    . 

1871 

Do 

Anglo-Deutsche  Bank  

1871 

Do  

Bankverein  in  Hamburg  

1872 

9  ooo 

Hamburg  (Berlin) 

Commerz-  u   Disconto-Bank 

1870 

Internationale  Bank  

1870 

1  8  ooo 

Do  

Norddeutsche  B  ank  

1856 

45,  ooo 

Do 

1856 

Do 

Maklerbank            

1871 

I     2OO 

Do 

1872 

Hanover  

Hannoversche  Disconto-  u.  Wechslerbank  . 

1872 

4,  800 

Kiel 

Kieler  Bank             

1872 

2,  4OO 

Konigsberg  (Prussia) 

Konigsberger  Vereinsbank  

1871 

4,  200 

Leer 

1872 

900 

Leipzig  

Allgemeine  Deutsche  Creditanstalt  

1856 

30,  ooo 

Do 

Communalbank  des  Konigreichs  Sachsen. 

1871 

600 

Do  

F  Schonheimerscher  Bankverein  

1872 

3,  ooo 

Do  

Leipziger  Disconto-Gesellschaft  

1872 

9,  600 

Do 

Leipziger  Vereinsbank  

1871 

8,  400 

Do 

Leipziger  Wechslerbank               .          .    . 

1872 

3.  15° 

Do  

Leipziger  Wechsler-  u.  Depositenbank  .  .  . 

1872 

2,  400 

Lubeck 

1871 

1  ,  500 

Do  

Vorschuss-  u.  Sparverein  

1864 

72 

1867 

3,  ooo 

Do 

Magdeburger  Wechsler-  u.  Discontobank  . 

1872 

2,  4OO 

1871 

4,  800 

Do 

Rheinische  Creditbank  

1870 

12,  OOO 

Miihlhausen  i  Thurin- 

1872 

I,  200 

gia. 

895 


National    Monetary     Commission 


German  credit  banks  in  1872 — Continued. 


Location. 

Designation. 

Year  of 
founda- 
tion. 

Paid-up 

share 
cap;tal 
at  end  of 
1872. 

Miihlhauseni.  Alsace.  . 
D« 

Banque  de  Mulhouse  

1871 
1864 

7,000 

marks. 
4,800 

Munich 

Bayerische  Handelsbank  

1869 

5»  100 

Do  

Bayerische  Vereinsbank  

1869 

9,  ooo 

Do 

1872 

Vereinsbank                              .  .    .  . 

1871 

Oldenburg  

Oldenburger  Spar-  u.  Leihbank  

1845 

I,  200 

Posen               .  . 

Bank  fur  Landwirtschaft  u.  Industrie.  .  .  . 

1870 

2,  269 

Do 

Ostdeutsche  Bank                     

1871 

Do  
Ratibor  
Rostock 

Provinzial  Wechsler-  u.  Discontobank  .  .  . 
Oberschlesischer  Creditverein  
Rostocker  Vereinsbank    

1871 
1871 
1871 

3,ooo 
i,  800 
3  ,  ooo 

Do 

Rostocker  Gewerbebank 

1872 

Stettin  

Stettiner  Vereinsbank  

1871 

4,  500 

Do.     ... 

Stettiner  Maklerbank  

1872 

i    200 

Strassburg  i.  Alsace.  .  . 
Do 

Strassburger  Bank  (Stabling)  
Bank  fur  Hlsass  und  Lothringen  ...;.... 

1852 

1871 

2,  4OO 

Stuttgart  

Stuttgarter  Bank  

1871 

7,  200 

Do 

Siiddeutsche  Provinzialbank 

1872 

Do  
Do  

Wurttemberger  Commissionsbank  
Wiirttemberger  Vereinsbank  

1872 
1869 

600 
6,  800 

Wernigerode 

Wernigeroder  Comm  -Gesellschaft  A  -G 

1865 

Wismar  

Vereinsbank  

1868 

375 

Zittau 

Oberlausitzer  Bank 

1871 

4   800 

Zwickau  

Zwickauer  Bank  

1872 

I,  200 

A  total  of  139  banks  with  a  combined  capital  of  1,122,113,000  marks,  of  which,  how- 
ever, a  considerable  portion  disappeared  a  short  time  after. 


896 


The     German     Great     Banks 

APPENDIX  IV. 

Representation  of  the  great  banks  on  the  supervisory  boards  of  stock  companies. 

[To  page  367.] 
BANK  FUR  HANDEL  UND  INDUSTRIE. 


Seats  on  the  supervisory 
board. 


Class  of  industry. 


Two  (vice-chairman) . 
One.  . 


One 

One  (chairman) .... 

One 

One 

One.  . 


One.  . 
One.  . 


One  (vice-chairman) .... 
One  (vice-chairman) .... 

One  (chairman) 

Oae.  . 


One 

One  (vice-chairman) , 


One  (chairman) 

One 

One.  . 


One. 
One. 


One 
One 


Two  (vice-chairman) 

90311°— II 58 


MINING,  SMELTING,  AND   SALT   WORKS. 

Deutsch-Luxemburgische  Bergwerks-    u.    Hutten-Gesell- 

schaft  in  Bochum. 
Heldburg,  A.-G.  fur  Bergbau,  bergbauliche  und  andere 

industrielle  Erzeugnisse,  Hildesheim. 
Harpener  Bergbau  A.-G.,  Dortmund. 
Holzverkohlungs-Industrie,  Konstanz. 
Internationale  Kohlenbergwerks-A.-G.,  Cologne. 
"Phonix,"  A.-G.  fur  Bergbau  und  Hiittenbetrieb,  Horde. 
Rheinische   A.-G.    fur  Braunkohlenbergbau   u.    Brikett- 

fabrikation,  Cologne. 

A.  Riebeck'sche  Montanwerke,  A.-G.,  Halle. 
Saar-  u.  Mosel-Bergwerks-Gesellschaft,  Karlingen. 

STONES   AND   EARTHS. 

A.-G.  fur  Glasindustrie  vorm.  Friedr.  Siemens,  Dresden. 
Annawerke,  Chamotte-  u.  Tonwaren,  Oeslau. 
Glashiitte  Schreiber  A.-G.,  Furstenberg  a.  O. 
Stralauer  Glashiitte  A.-G..  Berlin. 

METAI,   WORKING. 

Berliner  Metallwarenfabrik   H.   A.   Jtirst  &   Co.   A.-G. 

Berlin. 
Deutsche   Gold-  u.   Silber-Scheideanstalt,    Frankfort-on- 

the-Main. 

MACHINE  AND   INSTRUMENT   MAKING. 

Adlerwerke  vorm.  Heinrich  Kleyel  A.-G.,  Frankfort-on-the 

Main. 
A.-G.  Mix  &  Genest,  Telefon-  und  Telegraphen-Werke, 

Berlin. 
A.-G.,  Maschinenbau-Anstalt  vorm.  Venuleth  &   Eden- 

berger,  Darmstadt. 

Allgemeine  Elektrizitats-Gesellschaft,  Berlin. 
Deutsche  Niles,  Werkzeugmaschinen-Fabrik,  Oberschon- 

weide. 

Deutsch-Uberseeische    Elektrizitats-Gesellschaft,    Berlin. 
Deutsch  -  Siidamerikanische     Telegraphen  -  Gesellschaft, 

Cologne. 
Elektrizitatswerke  Homburg  v.  d.  H. 

897 


National    Monetary     Commission 


Representatian  of  the  great  banks  on  the  supervisory  boards  of  stock  com- 
panies— Continued . 

BANK  FUR  HANDEL  UND  INDUSTRIE— Continued. 


Seats  on  the  supervisory 
board. 


Class  of  industry. 


One .  .  . 


One 

One  (vice-chairman) 

One 

One 

One  (chairman) 


One 


One 

One  (vice-chairman) .... 
One  (chairman) 


One 

One  (vice-chairman) 


One 

One  (vice-chairman) 

One 

One  (vice-chairman) 
One  (chairman) .... 


One  (vice-chairman) 
One.  . 


One. 


One  (chairman) 

One 

One  (chairman) 

One 

One 

One  (vice-chairman) 
One.. 


MACHINE    AND    INSTRUMENT    MAKING — Continued. 

"Fenstra,"  Fabrik  fur  Eisenkonstruktionen  und  Brucken- 

bau,  Diisseldorf. 

A.-G.  Kortings  Elektrizitatswerke,  Berlin. 
Lech-Elektrizitatswerke,  Augsburg. 
Ludw.  Loewe  &  Co.,  Berlin. 
Maschinenbau-Gesellschaft,  Heilbronn. 
"Phonix,"  A.-G.  fur  Stuhl-,  Herd-  u.  Ofenindustrie  in 

Oberhausen. 
Veithwerke,  A.-G.,  Sandbach,  Automobil-  und  Fahrrad- 

fabrik. 

CHEMICALS. 

Bayerische  Stickstoffwerke  in  Munich. 
Chemische  Werke,  vorm.  H.  und  E.  Albert,  Biebrich. 
Chemische    Fabrik     Griesheim,      Elektron,      Frankfort- 
on-the-Main. 

ILLUMINANTS,  SOAPS,  FATS,  OILS,  VARNISHES. 

Deutsche  Petroleum  A.-G.,  Berlin. 
Frankfurter  Gasgesellschaft. 

TEXTILES   AND   LEATHER. 

I.  P.  Bemberg,  Oehde  (Buntfarberei). 

Gruschwitz,  Textilwerke,  Neusalz. 

Eduard  Lingel,  Schuhfabrik  A.-G.,  Erfurt. 

Vereinigte     Kunstseidefabriken,    Frankfort-on-the-Main. 

Wurttembergische  Kattunmanufaktur,  Heidenheim. 

PAPER. 

Albrecht  &  Meister,  A.-G.,  Berlin. 

A.-G.  fur  Buntpapierfabrikation,  Aschaffenburg. 

WOOD   AND    CARVING    INDUSTRY 

Holzindustrie  Herm.  Schiitt,  Czersk. 

FOODS   AND   DRINKS. 

Aktien-Zuckerfabrik,  Gr.-Gerau. 

Aktien-Zuckerfabrik  Wetterau,  Friedberg 

Altmunster  Brauerei,  Mainz. 

Continentale  Wasserwerks-Gesellschaft,  Berlin. 

Deutsche  Bierbrauerei,  Berlin. 

Gebr.  Stollwerck,  A.-G.,  Cologne-on-the-Rhine. 

Konservenfabrik  Job.  Braun,  Worms. 


The     German     Great     Bank 


Representation  of  the  great  banks  on  the  supervisory  boards  of  stock  com- 
panies— Continued . 

BANK  FUR  HANDEL  UND  INDUSTRIE— Continued. 


Seats  on  the  supervisory 
board. 


Class  of  industry. 


One 

One 

One 

One 

One  (chairman) 

Three  (chairman) 

One 

Two  (chairman) 

One 

One 

One 

Two 

One 

One 

Two  (vice-chairman) 

One 

One  (chairman) 

One 

Two  (chairman) 

One  (vice-chairman) 

One  (chairman) 

One 

One 

One  (chairman) 


One 

One  (chairman) 
One.. . 


One  (chairman) 

Two  (chairman) 

One 

One 

One 

One  (vice-chairman) 

One  (vice-chairman) 

One  (chairman) 

One.. . 


COMMERCIAL    ENTERPRISES. 

Bank  des  Berliner  Kassenvereins,  Berlin. 

Bank  fiir  Brauindustrie,  Berlin. 

Berliner  Hypothekenbank. 

Berg-  u.  Metallbank  in  Frankfort-on-the-Main. 

Boden-A.-G.  am  Amtsgericht  Pankow. 

Boden-A.-G.  Berlin-Nord. 

Borsigwalder  Terrain-Ges.  Berlin. 

Breslauer  Disconto-Bank  in  Breslau. 

Deutsch-Asiatiscke  Bank  in  Berlin. 

Deutsche  Treuhand-Gesellschaft,  Berlin. 

Gesellschaft  fiir  elektrische  Unternehmungen,  Berlin. 

Immobilien-Verkehrsbank,  Berlin. 

Kolnische  Hausrenten-A.-G. 

Neue  Boden-A.-G.,  Berlin. 

Ostbank  fiir  Handel  u.  Gewerbe,  Posen. 

Preussische  Pfandbriefbank,  Berlin. 

Reiniger,  Gebbert  &  Schall  A.-G.,  Erlangen. 

Siiddeutsche  Bodenkreditbank,  Munich. 

Siiddeutsche  Immobilien-Gesellschaft,  Mainz. 

Terrain-A.-G.  Berlin-Mariendorf,  Berlin. 

Terrain-Gesellschaft,  Berlin  u.  Vororte,  A.-G. 

Vereinsbank,  Wismar. 

Westliche  Boden-A.-G.,  Berlin. 

Wittenauer  Boden-Gesellschaft,  Berlin. 

INSURANCE. 

"Allianz,"  Versicherungs-Gesellschaft,  Berlin. 
Deutsche  Lebensversicherungsbank,  Berlin. 
"Industrie,"  Versicherungs-A.-G.,  Berlin. 

TRANSPORTATION. 

Dessauer  Strassenbahn-Gesellschaft. 
Frankfurter  Lokalbahn-Akt.-Ges. 
Grosse  Berliner  Strassenbahn. 
Kameruner  Eisenbahn-Gesellschaft,  Berlin. 
Luftschiffahrt  A.-G.,  Frankfort  on  the  Main. 
"Midgard,"  Deutsche Seeverkehrs-A.-G.,  Nordenham. 
Santa  Catharina-Eisenbahn-Gesellschaft,  Berlin. 
Suddeutsche  Eisenbahn-Gesellschaft,  Darmstadt. 
Westdeutsche  Eisenbahn-Gesellschaft,  Cologne. 


899 


National    Monetary     Commission 


Representation  of  the  great  banks  on  the  supervisory  boards  of  stock  com- 
panies— Continued . 

BANK  FUR  HANDEL  UND   INDUSTRIE— Continued. 


Seats  on  the  supervisory 
board. 


Class  of  industry 


One. 
One. 
One. 
One. 

One. 
One. 


FOREIGN    COMPANIES. 

Amsterdamsche  Bank. 

Banca  Marmorosch  Blanck  &  Co.,  Bucharest. 

Consolidated  Mines  Selection  Company,  London. 

Gesellschaft  fiir  elektrische  Beleuchtung  vom  Jahre  1886, 
St.  Petersburg. 

Societe  Generate  Beige  d'Entreprises  Electriques,  Brus- 
sels. 

K.  priv.  Wechselstuben-A.-G.,  "Mercur,"  Vienna. 


BERLINER  HANDELSGESELLSCHAFT. 


One 

One 

One  (vice-chairman) 
One... 


One  (vice-chairman) 

One  (director) 

One 

One  (chairman) .... 

One 

One 

One  (chairman) .... 
One  (vice-chairman) 
One.. . 


One 

One 

One 

One 

Qne  (chairman)  .... 


One. 


One  (vice-chairman) 

One 

One  (vice-chairman) . 

One.. . 


MINING,  SMEI/TING,  AND   SALT   WORKS. 

Bergwerks-Gesellschaft,  "Hibernia,"  Herne. 
"Bismarckhutte"  in  Bismarckhiitte. 
Eisenhiitte  Silesia,  Paruschowitz  in  Oberschl. 
Frankfurt,  Finckenheer,  Braunkohlen,  A.-G.  Charlotten- 

burg. 

Gewerkschaft,  "Viktoria"  Liinen,  Dortmund. 
Gewerkschaft  Giinthershall,  Gollingen. 
Harpeiier  Bergbau-Gesellschaft,  Dortmund. 
Hohenlohe-Werke  in  Hohenlohehiitte,  Upper  Silesia. 
Kaliwerke  Sarstedt. 
Kaliwerke  Friedrichshall  in  Schude. 
Kraft,  Bergbau,  A.-G.,  Leipzig. 
Oberschlesische  Kokswerke,  Berlin. 
Planiawerke,   A.-G.   fiir  Kohlenfabrikation  in  Plania  b. 

Ratibor. 

A.  Riebecksche  Montanwerke  in  Halle  a.  S. 
Rombacher  Hiittenwerke,  Rombach. 
Schantung  Bergbau-Gesellschaft,  Berlin. 
Schlesische  Kohlen-  u.  Kokswerke  in  Gottesberg  i.  Schl. 
Vereinigte  Lausitzer  Glaswerke,  A.-G.  Weisswasser. 

STONES   AND   EARTHS. 

Breitenburger  Portland-Cementwerke,  Hamburg. 

METAL,   WORKING. 

Aluminiumindustrie  Neuhausen. 
Eisen-  und  Stahlwerk,  Bethlen-Falva. 
Oberschlesische  Eisenindustrie  in  Gleiwitz. 
Rhenania,  Emaillierwerke,  A.-G.,  Diisseldorf. 


900 


The     German     Great     Banks 


Representation  of  the  great  banks  on  the  supervisory  boards  of  stock  com- 
panies— Continued. 

BERLINER  HANDELSGESELLSCHAFT— Continued. 


Seats  on  the  supervisory 
board. 


Class  of  industry. 


One 

One 

One 

One... 


One  (chairman)  .... 
One  (vice-chairman) , 

One 

One 

One  (vice-chairman) 

One 

One  (chairman)  .... 
One  (chairman)  .... 
One  (vice-chairman) 
One.. . 


One 

Two  (vice-chairman) .  . 
Two  (vice-chairman) .  . 
Two  (vice-chairman) . . 


One. 


One 
One 


One 


(vice-chairman) 
(vice-chairman) 


Two  (vice-chairman) .  . 


One 
One 
One 
One 
One 
One 
One 
One 


(chairman) .... 
(vice-chairman) 


METAL  WORKING — continued. 
Rheinische  Stahlwerke,  Meiderich. 
Russische  Eisenindustrie,  Gleiwitz. 
Vereinigte  Deutsche  Nickelwerke,  Schwerte. 
Westfalische  Drahtindustrie,  Hamm  in  Westphalia. 

MACHINE    CONSTRUCTION   AND    INSTRUMENT   MAKING. 

Akkumulatorenfabrik,  Berlin- 
Allgemeine  Elektrizitats-Gesellschaft,  Berlin. 
Benrather  Maschinenfabrik,  Berlin. 
Berlin- Anhaltische  Maschinenbau,  Berlin. 
Berliner  Elektrizitatswerke,  Berlin. 
Deutsche  Nileswerke,  Oberschoneweide. 
Elektrotechnische  Werke,  Berlin. 
Kraftubertragungs-Werke,  Rheinfelden. 
Julius  Pintsch,  Berlin,  Elektrizitatswerk. 
Stettiner  Maschinenbau,  "Vulcan,"  Stettin. 

CHEMICALS. 

Bayerische  Stickstoffwerke,  Miinchen. 
Chemische  Fabrik,  Lindenhof,  C.  Weyl,  A. -G.,  Mannheim. 
Dellarocca,  Chemische  Fabrik,  A.-G.,  Berlin. 
Riitgerswerke,  Charlottenburg. 

ILLUMINANTS,  SOAPS,  FATS,  OILS,  VARNISHES. 

Deutsche  Continental-Gasgesellschaft,  Dessau. 

FOODS    AND    DRINKS. 

Leipziger  Bierbrauerei,  Reudnitz. 

W.  A.  Scholten,  Starke-  und  Syrupfabrik,  A.-G.,  Bran- 

denburg. 
Zuckerraffinerie  Tangermiinde. 

BUILDING   TRADES. 

Wilhelm  Bruch,  Kanalbau- A. -G. ,  Berlin. 
COMMERCIAL   ENTERPRISES. 

A.-G.  fiir  Erwerb-  u.  Verwertungsindustrie,  Neuhof 
Bahnhof  Jungfernheide,  Boden-Gesellschaft,  Berlin. 
Bank  fiir  deutsche  Eisenbahnwerte,  Berlin. 
Bank  fiir  elektrische  Unternehmungen,  Zurich. 
Berliner  Maklerverein,  Berlin. 
Deutsch-Asiatische  Bank,  Berlin. 
Deutscher  Eisenhandel,  A.-G.,  Berlin. 
Deutsche  Hypothekenbank,  Berlin. 


9OI 


National    Monetary     Commission 


Representation  of  the  great  banks  on  the  supervisory  boards  of  stock  com- 
panies— Continued . 

BERLINER  HANDELSGESELLSCHAFT— Continued. 


Seats  on  the  supervisory 
board. 


Class  of  industry. 


One 

Three  (director) 

One  (chairman) 

One 

One 

Two  (chairman) 

One 

One.  . 


One  (chairman) 

One 

One 

One 

One.  . 


Two    (director  and    chair- 
man). 

One  (vice-chairman) 

Two  (vice-chairman) 

One.  . 


One. 
One. 
Two 
One. 
One. 
One. 

Two. 

One. 
One. 
One. 
One. 
One. 
Two. 
One. 
One. 
One. 


COMMERCIAL,  ENTERPRISES  —  continued.  . 

Diamanten-Pacht-Ges.,  Berlin. 
Handelsgesellschaft  fiir  Grundbesitz,  Berlin. 
Industriegelande  Schoneberg,  A.-G.,  Berlin. 
Liquidationsverein  fiir  Zeitgeschafte,  Berlin. 
Ostbank  fiir  Handel  u.  Gewerbe,  Posen. 
Papierfabrik  Koeslin,  A.-G.,  Koeslin. 
Preussische  Hypotheken-Aktienbank,  Berlin. 
Reichsbank,  Berlin. 

TRANSPORTATION    ENTERPRISES. 

A.-G.  fiir  Verkehrswesen,  Berlin. 

Braunschweig-Schoninger  Eisenbahn,  Braunschweig. 

Brohlthal  Eisenbahn-Gesellschaft,  Cologne. 

Capito  &  Klein,  A.-G.,  Benrath. 

Deutsche    Kolonial-Eisenbahn-  u.  Betriebs-Gesellschaft, 

Berlin. 
Kamerun-Eisenbahn-Gesellschaft,  Berlin. 

Leipziger  elektrische  Strassenbahn,  Leipzig. 
Ostdeutsche  Eisenbahn-Gesellschaft,  Konigsberg. 
Westdeutsche  Eisenbahn-Gesellschaft,  Cologne. 

FOREIGN    COMPANIES. 

A.-G.  Hadeland,  Bergwerk  zu  Grua  (Norway). 

A.-G.  "Elektrizitat,"  Warsaw. 

Banca  Marmorosch,  Blank  &  Co.,  Bucharest. 

Banque  Andreewitch  &  Co.,  A.-G.,  Belgrade. 

Banque  Internationale  de  Bruxelles. 

Bohmische   Montanges.,  vorm.  fiirstlich-Fiirstenbergische 

Montanwerke,  Vienna. 
Gesellschaft  der  Metallfabriken,  vorm.  B.  Hantke,  War- 

saw. 

A.  Gorz  &  Co.,  London. 

Kraftwerk  Laufenburg  in  Laufenburg,  Switzerland. 
Labouchere,  Oyens  &  Co.,  Bank,  Amsterdam. 
Norge  Erz-Bergbau,  Ges.  zu  Hakedal  (Norway). 
Oesterreich.  Alpine-Montan-Gesellschaft,  Vienna. 
Prager  Eisenindustrie,  Vienna. 

Schantung-Eisenbahn-Gesellschaft,  Tsingtau,  China. 
Schweizerische  Metallbank  in  Basle. 
Siiddeutsche     Donau-Dampfschiffahrts-Gesellschaft,    Vi- 


One.  . 


Ziiricher  Eisenbahn-Bank,  Zurich. 


902 


The     German     Great     Banks 


Representation  of  the  great  banks  on  the  supervisory  boards  of  stock  com- 
panies— Continued . 

COMMERZ-  UND    DISCONTO-BANK. 


Seats  on  the  supervisory 
board. 


Class  of  industry. 


One 


One 

One  (vice-chairman) 


One 
One, 


One 
One 


One 

One 

One  (vice-chairman) 
Two  (chairman) .  .  .  . 


One 


One 


One, 


One 
One 
One 


One 


Two  (chairman) 
Two  (chairman) 

One 

One.  . 


MINING,  SMEI/TING,  AND   SALT   WORKS. 

Mecklenburgische  Kali-Salzwerke,  Jessenitz. 

STONES   AND    EARTHS. 

Portland-Cementfabrik  "Germania,"  A.-G.  in  Lehrte. 
"Teutonia,"  Misburger  Portland-Cementfabrik,  Hanover. 

METAL  WORKING. 

Stanz-  u.  Emaillierwerke  vorm.  Carl  Thiel  &  Sohne,  A.-G. 

in  Liibeck. 
Berliner  Gusstahl-  u.  Eisengiesserei,  A.-G.,  Berlin. 

MACHINE   AND   INSTRUMENT    MAKING. 

A.-G.  Gorlitzer  Maschinenbauanstalt  u.  Eisengiesserei. 
Continental  Gesellschaft  fur  elektrische  Unternehmun- 

gen,  Nuremberg. 

Diisseldorfer  Maschinenbau-A.-G.  vorm.  J.  Lohenhausen. 
Elektrizitats-A.-G.  vorm.  Schuckert  &  Co.,  Nuremberg. 
Leipziger  Werkzeugmaschinenfabrik  vorm.  W.  v.  Pittler. 
Maschinenbauanstalt  u.  Eisengiesserei  vorm.  Th.  Fldther, 

Gassen. 
Maschinenfabrik  fur  Miihlenbau  vorm.  C.  G.  W.  Kapler 

Berlin. 

CHEMICALS. 

Chemische  Pabriken  Harburg-Stassfurt,  vorm.  Thorl  & 
Heidtmann,  A.-G.,  Harburg. 

TEXTILES. 

Norddeutsche  Jutespinnerei  u.  Weberei,  Hamburg-Har- 
burg. 

POODS   AND    DRINKS. 

Barmbecker  Brauerei-A.-G.,  Hamburg-Barmbeck. 
Brauerei  "Germania,"  A.-G.,  Berlin. 
Norddeutsche  Zuckerraffinerie,  Frellstedt. 

BUILDING   TRADES. 

A.-G.  Berliner  Neustadt  in  Liquid,  in  Berlin. 
COMMERCIAL   ENTERPRISES. 

Credit-  u.  Sparbank  in  Leipzig. 

Grundstiicks-A.-G.  in  Berlin. 

Lichtenberger  Terrain-A.-G. 

Revisions-  u.  Vermogensverwaltung,  A.-G.,  Berlin. 


903 


National    Monetary     Commission 


Representation  of  the  great  banks  on  the  supervisory  boards  of  stock  com- 
panies— Continued . 

COMMERZ-  UND  DISCONTO-BANK — Continued. 


Seats  on  the  supervisory 
board. 


One 


One  (vice-chairman) 
One 


One. 
One. 


Ofle 

One  (chairman) 


One. 
One. 
One. 


Class  of  industry. 


COMMERCIAL,  ENTERPRISES — Continued. 
Terrain-Gesellschaft   am   Teltowkana!    Rudow-Johannis- 

thal. 

Terrain-Gesellschaft  Munchen,  Friedenheim. 
Waren-Commissionsbank  in  Hamburg. 

INSURANCE   ENTERPRISES. 

"  Industrie"-Versicherungs-A.-G.,  Berlin. 
"Nordstern,"    Unfall-   u.    Altersversicherungs-A.-G.,    El- 
berfeld. 

TRANSPORTATION   ENTERPRISES. 

Bergische  Kleinbahn-A.-G.  in  Elberfeld. 

Reinickendorf  -  Liebenwalde  -  Schonebecker       Eisenbahn- 

A.-G. 
Vereinigte  Elbschiffahrts-Gesellschaften,  A.-G.  in  Dresden. 

HOSTELRY   AND   TAVERN    ENTERPRISES. 

Kaiserkeller,  A.-G.,  Berlin. 

FOREIGN    COMPANIES. 

Santa  Catharina-Eisenbahn-Gesellschaft,  Berlin. 


DEUTSCHE   BANK. 


One  (chairman) 

One  (vice-chairman) . 

One.. 

One 

One 

One  (vice-chairman) , 

One 

One 

One 

One  (vice-chairman) 


One. 
One 
One, 


One  (vice-chairman) 


MINING,    SMELTING,    AND   SALT   WORKS. 

Bleichert'sche  Braunkohlenwerke,  Neukirchen. 

Bochumer  Verein  fur  Bergbau  u.  Gussstahlfabrikation. 

Continentale  Wasserwerks-Gesellschaft,  Berlin. 

Deutsche  Mineralol-Industrie,  A.-G.,  Berlin. 

Essener  Bergwerksverein  "Konig  Wilhelm." 

Essener  Steinkohlenbergwerke. 

Gelsenkirchener  Bergwerks-A.-G. 

Gewerkschaft  Wilhelmsschacht,  Gnaudorf-Boma. 

Harpener  Bergbau-A.-G.,  Dortmund. 

Konigsborn,  A.-G.,  fiir  Bergbau,   Salinen-  u.   Solbadbe- 

trieb. 

'Phonix,"  A.-G.  fiir  Bergbau  und  Hiittenbetrieb,  Horde. 
Rombacher  Hiittenwerke. 
Otavi,  Minen-  u.  Eisenbahn-Gesellschaft,  Berlin. 

STONES   AND    EARTHS. 

Steingutfabrik  Sornewitz,  Meissen. 


904 


The     German     Great    Banks 


Representation  of  the  great  banks  on  the  supervisory  boards  of  stock  com- 
panies— Continued . 


DEUTSCHE  BANK— Continued. 


Seats  on  the  supervisory 
board. 


Class  of  industry. 


One 

One  (vice-chairman) 
One  (chairman) .... 


One  (vice-chairman) 

One  (chairman) 

One 

One 

One 

One 

One 

Two   (i   chairman,  i   direc- 
tor). 

Two  (chairman) 

One 

One.  . 


One 

One  (vice-chairman) 
One  (chairman) .... 

One 

One 

One 

One  (vice-chairman) 


One 


One 

One 

Two 

One 

One  (chairman) . 


One. 


One 

Two  (chairman) . 
One  (chairman) . 
One.  . 


METAL   WORKING. 

Aluminium-Industrie,  A.-G.,  Neuhausen. 
Hirsch,  Kupfer-  und  Messingwerke,  Halberstadt. 
Reichelt,  Metallschrauben-A.-G.,  Ftirstenwalde. 

MACHINE   CONSTRUCTION   AND   INSTRUMENT   MAKING. 

Akkumulatorenfabrik  Berlin- Hagen. 

Bayerische  Elektrizitatswerke,  Miinchen. 

Benrather  Maschinenfabrik,  Berlin. 

Bergmann,  Elektrizitatswerke,  Berlin. 

Berlin-Anhaltische  Maschinenbau-Gesellschaft. 

Berliner  Elektrizitats-Werke. 

Chemnitzer  Werkzeugmaschinenfabrik. 

Deutsche  Ueberseeische  Elektrizitats-Gesellschaft,  Ber- 
lin. 

Elektrische  Licht-  u.  Kraftanlagen,  Berlin. 

Fabrik  fur  photographische  Apparate,  Dresden. 

J.  Frerichs  &  Co.,  Osterholz,  Maschinenfabrik  u.  Schiffs- 
werft. 

Carl  Hamel,  Schonau,  Maschinenfabrik. 

Kraf tiibertragungswerke ,  Rheinf elden. 

Mannesmannrohren-Werke. 

Markische  Maschinenbau-Anstalt,  Wetter. 

Maschinenfabrik  Augsburg-Niirnberg. 

Oberschlesische  Eisenbahnbedarfs-A.-G.,  Friedenshiitte. 

Orenstein  &  Koppel,  Berlin,  A.-G.  fur  Feld-  und  Klein- 
bahnbedarf. 

Jul.  Pintsch  A.-G.,  Berlin,  Maschinenfabrik  u.  Beleuch- 
tungs-Gesellschaft. 

Rheinisch-Westfalisches  Elektrizitatswerk,  Essen. 

F.  Kiippersbusch  &  Sohne,  A.-G. 

Siemens  &  Halske,  Berlin. 

Ernst  Schiess.Werkzeugmaschinenfabrik,  Dtisseldorf. 

Voigt  &  Haeffner,  A.-G.,  Frankfort  on  the  Main. 

CHEMICALS. 

J.  D.  Riedel,  Berlin,  Chemische  Fabrik. 

ILLUMINANTS,  SOAPS,  FATS,  OILS,  AND   VARNISHES. 

Deutsche  Continental-Gas-Gesellschaft,  Dessau. 
Deutsche  Petroleum-A.-G.,  Berlin. 
Europaische  Petroleum-Union,  Bremen. 
F.  Thorls,  Vereinigte  Harburger  Olfabriken. 


905 


National    Monetary     Commission 


Representation  of  the  great  banks  on  the  supervisory  boards  of  stock  com- 
panies— Continued . 

DEUTSCHE  BANK— Continued. 


Seats  on  the  supervisory 
board. 


One 

One 

One  (vice-chairman) 
One.  . 


One 

One  (vice-chairman) 


One. 


One  (chairman)  .... 


One 
One 
One 


One  (chairman) 
One.  . 


One  (chairman) .... 
One  (vice-chairman) 

Two  (chairman) .  .  .  . 

One 

One  (chairman) .... 


One 

One  (chairman)  .... 


One 

One  (president) .... 

One 

Six  (director) 

One 

One  (vice-chairman) 
One.  . 


Class  of  industry. 


TEXTILES. 

Allgauer  Baumwollspinnerei  u.  Weberei. 

Baumwollspinnerei  "Germania,"  Epe. 

Bremer  Wollkammerei. 

Bremer  Tauwerkfabrik   A.-G.,    vorm.   C.    H.    Michelsen, 

Grohn. 

Schlesische  Textilwaren,  Methner  &  Frahne,  Landeshut. 
Vereinigte  Glanzstoffabriken,  Elberfeld. 

PAPER. 

Paul  Suss,  Luxuspapierfabrik,  Dresden. 

RUBBER. 

Vereinigte  Berlin-Frankfurter  Gummiwaren. 

FOODS   AND    DRINKS. 

Aktien-Muhlenwerke  Stockau-Reichertshofen-Mauching. 
Zuckerfabrik  Frobeln. 

Wasserwerk  fur  das  nordliche  westfalische  Kohlenrevier, 
Gelsenkirchen . 

BUILDING   TRADES. 

Gesellschaft  fiir  den  Bau  von  Untergrundbahnen,  Berlin. 
Internationale  Baugesellschaft,  Frankfort  on-the-Main. 

ART   INDUSTRY. 

Kunstdruck-  u.  Verlagsanstalt,  Wetzel  &  Naumann,  Leip- 
zig. 
Moritz  Prescher  Nachf.,  A.-G.,  Leutzsch,  Kunstdruckerei. 

COMMERCIAL,    ENTERPRISES. 

Bergisch-Markische  Bank,  Elberfeld. 

Berliner  Maklerverein. 

Bodengesellschaft  am  Hochbahnhof  Schonhauser  Allee, 

Berlin. 

Borsenhandelsverein,  Berlin. 
Deutsche     Treuhand-Gesellschaft,      Berlin      (Revisions- 

Gesellschaft). 

Deutsche  Handels-  u.  Plantagen-Gesellschaft,  Hamburg. 
Deutsche  Kolonial-Gesellschaft  fiir  Siidwestafrika. 
Deutsche  Hypothekenbank,  Meiningen. 
Deutsche  Ueberseeische  Bank,  Berlin. 
Deutsche  Vereinsbank,  Frankfort  on-the-Main. 
Essener  Bankverein. 
Essener  Kreditanstalt. 


Q06 


The     German     Great    Banks 


Representation  of  the  great  banks  on  the  supervisory  boards  of  stock  com 
panics — Continued . 


DEUTSCHE  BANK— Continued. 


Seats  on  the  supervisory 
board. 


Class  of  industry. 


One 

One  (chairman) 


One 

One 

One  (chairman) , 

One 

One  (chairman) 

One 

One  (delegate  and  member 
of  the  central  committee). 

One 

One 

One  (chairman) 

One 

One.  . 


One 

One.  . 


One .... 


One  (vice-chairman) 
One.  . 


One 

One 

One 

One  (vice-chairman) 


One 


One 

One  (vice-chairman) . 

One  (vice-chairman) . 

One 

One 

One.  . 


COMMERCIAL  ENTERPRISES — continued. 
Hannoversche  Bank. 
Mecklenburgische      Hypotheken-      und      Wechselbank 

Schwerin. 

Mecklenburgische  Sparbank,  Schwerin. 
Neu-Bellevue,  A.-G.  fur  Grundstiicksverwertung,  Berlin. 
Neu-Westend,  A.-G.  fur  Grundstiicksverwertung,  Berlin. 
Norddeutsche  Kreditanstalt,  Konigsberg. 
Preussische  Bodenkredit-Aktienbank,  Berlin. 
Privatbank,  Gotha. 
Reichsbank,  Berlin. 

Rheinische  Kreditbank,  Mannheim. 

Sachsische  Bank,  Dresden. 

Schlesischer  Bankverein,  Breslau. 

Suddeutsche  Bank,  Mannheim. 

Schoneberg-West,     A.-G.     fur     Grundstucksverwertung. 

Berlin. 
Terrain-Gesellschaft  am    Teltowkanal,  Rudow-Johannis- 

thal,  A.-G. 
Wilmersdorfer  Terrain-Gesellschaft  "Rheingau,"  Berlin. 

INSURANCE    ENTERPRISES. 

Allgemeine  Versicherungs-Gesellschaft  fur  See-,  Fluss- 
u.  Landtransport,  Dresden. 

"Allianz,"  Versicherungs-A.-G.,  Berlin. 

"Atlas,"  Deutsche  Lebensversicherungs-Gesellschaft, 
Ludwigshafen. 

Kontinentale  Versicherungs-Gesellschaft,  Mannheim. 

Mannheimer  Versicherungs-Gesellschaft. 

Sachsische  Riickversicherungs-Gesellschaft  in  Dresden. 

Transatlantische  Giiterversicherungs-Gesellschaft  in  Ber- 
lin. 

"Union,"  Allgemeine  Versicherungs-Gesellschaft,  Berlin. 

TRANSPORTATION    ENTERPRISES. 

A.-G.  "Weser,"  Schiffswerft,  Bremen. 

Deutsch-Australische  Dampfschiffs-Gesellschaft,  Ham- 
burg. 

Gesellschaft  fur  elektrische  Hoch-  und  Untergrundbah- 
nen,  Berlin. 

Elektrische  Strassenbahn,  Barmen-Elberfeld. 

Norddeutscher  Lloyd,  Bremen. 

Ostafrikanische  Eisenbahn-Gesellschaft,  Berlin. 


907 


National    Monetary     Commission 


Representation  of  the  great  banks  on  the  supervisory  boards  of  stock  com- 
panies— Continued . 

DEUTSCHE  BANK— Continued. 


Seats  on  the  supervisory 
board. 


Class  of  industry. 


Two  (chairman) 

Two  (chairman) 

Two  (vice-chairman) . 
One  (vice-chairman)  . 
One  (vice-chairman)  . 


One 

Two  (chairman) 

One 

One  (chairman) 

One 

Two  (vice-chairman) .  . 
Three  (vice-chairman) . 
Two  (chairman) 


FOREIGN    COMPANIES. 

Anatolische  Eisenbahn-Gesellschaft,  Constantinople. 

Bagdad  Eisenbahn-Gesellschaft. 

Bank  fur  elektrische  Unternehmungen,  Zurich. 

Bank  fiir  orientalische  Eisenbahnen,  Zurich. 

Betriebsgesellschaft     der     orientalischen     Eisenbahnen, 

Vienna. 

Compania  Barcelonesa  de  Electricidad. 
Eisenbahn-Gesellschaft  Mersina-Adana. 
A.  Goerz  &  Co.,  Ltd.,  London. 

Gesellschaft  fiir  elektrische  Beleuchtung,  St.  Petersburg. 
National  Bank  of  South  Africa,  London. 
Socie'te'  du  Chemin  de  Fer  Ottoman  Salonique-Monastir. 
Societ£  du  Port  de  Haidar-Pascha,  Constantinople. 
Steaua  Romana,  A.-G.  fiir  Petroleumindustrie,  Bucharest. 


DIRECTION  DER  DISCONTO-GESELLSCHAPT. 


One  (chairman) 

One 

One 


One 

One 

Two  (chairman) 

Three 

Three 

One 

Two 

Two 

One  (chairman) . 

Two.  . 


One.  . 
One.. 


One. 
One. 


MINING,  SMELTING,  AND   SALT   WORKS. 

Bochumer  Bergwerks-A.-G.,  Bochum. 

Continentale  Tiefbohrgesellschaft,  Halle. 

Deutsch-Luxemburger  Bergwerks-  u.  Hiitten-A.-G.,  Bo- 
chum. 

Diamanten  Regie-Gesellschaft. 

Eschweiler  Bergwerksverein. 

Gelsenkirchener  Bergwerks-A.-G.,  Gelsenkirchen. 

Gewerkschaft  Braunkohlengrube,  Borna. 

Gewerkschaft  Christoph  Friedrich. 

Hiistenen  Gewerkschaft. 

Otavi  Minen-  und  Eisenbahn-Gesellschaft,  Berlin. 

"Phonix,"  A.-G.  fiir  Bergbau  u.  Hiittenbetrieb,  Laar. 

"Union,"  A.-G.  fiir  Bergbau,  Eisen-  u.  Stahlindustrie. 
Dortmund. 

Zinkhtitten-  und  Bergwerks-A.-G.  vorm.  Dr.  A.  Lowitscb 
&  Co.,  Kattowitz. 

STONES   AND   EARTHS. 

A.-G.  fiir  Betonbau  Diss  &  Co.,  Diisseldorf. 
Porzellanfabrik  Kahla. 

METAL   WORKING. 

Neuwalzwerk,  A.-G.,  Bosperde. 
Rheinische  Stahlwerke,  Meiderich. 


908 


The     German     Great    Banks 


Representation  of  the  great  banks  on  the  supervisory  boards  of  stock  com- 
panies— Continued . 
DIRECTION  DER  DISCONTO-GESELLSCHAFT— Continued. 


Seats  on  the  supervisory 
board. 


Class  of  industry. 


One 

One 

One  (vice-chairman) 
One  (vice-chairman) 
Three .  . 


One., 
One. 
One. 


One  (vice-chairman) 


One 

One  (chairman) 

Two 

Two .  . 


One  (chairman) 

Three.. 


One. 


Two 

One 

Two  (vice-chairman) 

Two 

One 

One 

One 

One 

Four    (r    vice-chairman,     i 

chairman). 

Two  (vice-chairman) 

One 

Four    (i    chairman    and     i 

director). 

One 

One 

One 

One... 


MACHINE   CONSTRUCTION  AND   INSTRUMENT   MAKING. 

Allgemeine  Elektrizitats-Gesellschaft,  Berlin. 
Bergmann,  Elektrizitatswerke,  Berlin. 
Berliner  Maschinenbau-A.-G.,  Berlin. 

Deutsche  Ueberseeische  Elektrizitats-Gesellschaft,  Berlin. 
Maschinenfabrik  u.  Miihlbau-Anstalt  H.  Luther,  Braun- 
schweig. 

Rheinisch-Wevstfalische  Elektrizitatswerke,  Essen. 
Sachsische  Maschinenfabrik,  Chemnitz. 
Turbinia,  Deutsche  Parsons  Marine  A.-G. 

CHEMICAL   INDUSTRY. 

Anglo  -  Continent,    vorm.    Ollendorffsche    Guano- Werke, 

Hamburg. 

Berliner  Benzinwerke,  Lichtenberg. 
Dynamit-A.-G.,  Hamburg. 
Internationale  Wasserstoff-Gesellschaft. 
Kaliwerke,  Aschersleben. 

ILLUMINANTS,  SOAPS,  FATS,  OILS,  VARNISHES. 

Allgemeine  Elektrizitats-Gesellschaft,  Berlin. 
Allgemeine  Petroleumindustrie,  Berlin. 

POODS   AND   DRINKS. 

Freiherrlich  v.  Tucher'sche  Brauerei,  Nuremberg. 
COMMERCIAL  ENTERPRISES. 

Allgemeine  Deutsche  Kreditanstalt,  Leipzig. 

Bank  des  Berliner  Kassenvereins,  Berlin. 

Bank  fur  Thiiringen  vorm.  B.  M.  Strupp,  Meiningen. 

Bank  fiir  Chile  und  Deutschland,  Hamburg. 

Barmer  Bankverein,  Hinsberg,  Fischer  &  Co.,  Barmen. 

Bayerische  Disconto-  und  Wechselbank,  Nuremberg. 

Bayerische  Revisions-  und  Vermogens-A.  G.,  Munich. 

Berliner  Maklerverein. 

Brasilianische  Bank  fur  Deutschland,  Hamburg. 

Busse  &  Co.,  Berlin,  Bankgeschaft. 

Deutsche  Afrika-Bank,  Hamburg. 

Deutsche  Asiatische  Bank,  Shanghai  u.  Berlin. 

Deutscher  Eisenhandel,  A.-G. 
Deutsche  Grundkreditbank,  Gotha. 
Deutsche  Hypothekenbank,  Meiningen. 
Deutsch-Ostafrikanische  Bank,  Berlin. 


909 


National    Monetary     Commission 

Representation  of  the  great  banks  on  the  supervisory  boards  of  stock  com- 
panies— Continued . 

DIRECTION  DER  DISCONTO-GESELLSCHAFT— Continued. 


Seats  on  the  supervisory 
board. 


Class  of  industry. 


One 

One  (chairman) 

One 

Two  (unlimited  partners) . . 

One 

One 

One 

One  (member  of  the  central 
committee) . 

Three 

One 

Two  (vice-chairman) 

Two  (vice-chairman) 

One... 


One. 
One. 


One. 


One.. 
One.. 


One. . . 
Two.  . 
One. . . 


One. 


One 

One 

One  (chairman) 

Two 

One  (chairman) 

One 

One 

One 

Two.  . 


COMMERCIAL  ENTERPRISES — continued. 

Konigsberger  Terrain-A.-G. 

Landbank,  Berlin. 

Magdeburger  Bankverein. 

Norddeutsche  Bank,  Hamburg. 

Oberlausitzer  Bank,  Zittau. 

Preussische  Zentral-Bodenkredit-A.-G.,  Berlin. 

Preussische  Hypotheken-Aktieubank,  Berlin. 

Reichsbank,  Berlin. 

Revision,  Treuhand-A.-G.,  Berlin. 
Heinrich  Aug.  Schulte,  A.-G.,  Dortmund. 
Stahl  &  Federer,  A.-G.,  Stuttgart. 
Siiddeutsche  Disconto-Gesellschaft,  Mannheim. 
Terrain-Gesellschaf t  B  erlin-Siid westen. 

PLANTATION    COMPANIES. 

Deutsche  Kolonisationsgesellschaft  fur  Siidwestafrika. 
Neu-Guinea-Compagnie. 

ENTERTAINMENT   ENTERPRISES. 

Berliner  Eispalast-Gesellschaft,  Berlin. 

INSURANCE  ENTERPRISES. 

"Nordstern,"  Lebensversicherung  in  Berlin. 
"Nordstern,"  Unfall-  und  Altersversicherung  in  Berlin. 

TRANSPORTATION   ENTERPRISES. 

Brothaler  Eisenbahngesellschaft,  Hennef. 

Deutsch-Chinesische  Eisenbahn-Gesellschaft. 

Deutsche    Ostafrika-Linie,   Hamburg,   Dampfschiffahrts- 

Gesellschaft. 
Grosse  Leipziger  Strassenbahn. 

FOREIGN   COMPANIES. 

Banca  Commerciale  Italiana,  Milan. 

Banque  de  Credit,  Sofia. 

Banca  Generala  Romana. 

Banque  Generale  Roumaine,  Bucharest. 

Compagnie  Generale  des  Tramways  de  Behire,  Brussels. 

Compagnie  du  Chemin  de  Fer  du  Congo. 

Compagnie  industrielle  des  Petroles,  Paris. 

Compagnie  Internationale  d'Orient,  Brussels. 

Concordia,  Rumanische  Petroleumindustrie,  Bucharest. 


910 


The     German     Great     Banks 


Representation  of  the  great  banks  on  the  supervisory  boards  of  stock  com- 
panies— Continued . 

DIRECTION  DER  DISCONTO-GESELLSCH  A  FT— Continued. 


Seats  on  the  supervisory 
board. 


Class  of  industry. 


One  (chairman) 


One 

One 

One 

One 

One 

One 

Two  (i  chairman,  i  director) 
One.  . 


One. 
Two. 
One. 


FOREIGN  COMPANIES— continued. 

"Credit  Petrolifer,"  Gesellschaft  zur  Forderung  der  Ent- 
wicklung  der  rumanischen  Petroleumindustrie. 

Deutsche  Niederlassungs-Gesellschaft,  Tientsin. 

Elektrische  Strassenbahn,  Valparaiso. 

General  Mining  and  Finance  Corporation,  Johannesburg. 

Grosse  Venezuela-Eisenbahn. 

Ostafrikanische  Eisenbahn-Gesellschaft. 

OsteuropaischeTelegraphen-Gesellschaft. 

Schantung-Eisenbahn -Gesellschaft,  Tsingtau. 

Societ^  Financiere  de  Transport  et  d'Entreprises  Indus- 
trielles,  Brussels. 

Societe  Generate  Beige  d'Entreprises  electriques. 

"Vega,"  Rumanische  Petroleum-Raffinerie. 

Warschau-Wiener  Eisenbahn-Gesellschaft. 


DRESDNER  BANK. 


One 

One .  . 


Two  (vice-chairman) 


One 

One 

One 

One 

Three  (chairman) 

One ; 

One.  . 


One 

One.  . 


One 

One  (vice-chairman)  .  .  . 
One.  . 


MINING,  SMELTING,  AND   SALT   WORKS 

"Bismarckhtitte"  in  Bismarckhutte. 

Deutsch-Luxemburger  Bergwerks-  und  Hiitten-Gesell- 
schaft  in  Bochum. 

Deutsch-Oesterreichische  Bergwerks-Gesellschaft,  Dres- 
den. 

Gelsenkirchener  Bergwerks-A.-G.  in  Gelsenkirchen. 

Internationale  Kohlenbergwerks-Gesellschaft,  Cologne. 

Miilheimer  Bergwerksverein  in  Miilheim  a.  R. 

"Phonix,"  A.-G.  fur  Bergbau  u.  Hiittenbetrieb,  Horde. 

Saar-  u.  Mosel-Bergwerks-Gesellschaft  zu  Karlingen. 

Schlesische  Zinkhiitten-A.-G.  in  Lipine. 

Vereinigte  Konigs-  u.  Laurahutte,  A.-G.  f.  Bergbau  u. 
Huttenbetrieb,  Berlin. 

STONES   AND    EARTHS. 

Porzellanfabrik  Ph.  Rosenthal  &  Co.,  A.-G.  in  Selb. 
Sachsisch-Bohmische  Portland-Zementfabrik,  A.-G.,  Dres- 
den. 

METAL   WORKING. 

Gebr.  Bohler  &  Co.,  A.-G..  Berlin. 

A.-G.  Lauchhammer  in  Lauchhammer,  Eisenwerk, 

Sachsische  Gussstahlfabrik  in  Dohlen  bei  Dresden. 


National    Monetary     Commission 


Representation  of  the  great  banks  on  the  supervisory  boards  of  stock  com- 
panies— Continued . 


DRESDNER  BANK— Continued. 


Seats  on  the  supervisory 
board. 


Class  of  industry. 


One 

One 

One 

One 

One 

One 

One 

One 

One  (vice-chairman) 

One  (chairman) 

One 

One  (chairman) 

One 

One  (vice-chairman) 


One  (chairman) 


One  (vice-chairman) 

One.  . 


One, 


One 
One 


One 

One 

One 

One  (chairman) 

One  (chairman) 

One 

Two     (vice-chairman     and 
chairman). 

Two  (chairman) 

Two  (chairman) 

Two  (director) 

One.  . 


MACHINE   CONSTRUCTION   AND   INSTRUMENT   MAKING. 

Allgemeine  Elektrizitats-Gesellschaft  zu  Berlin. 
Ascherslebner  Maschinenbau-A.-G.  in  Aschersleben. 
Balcke,  Tellering  &  Co.,  A.-G.  in  Benrath. 
Deutsche  Waffen-  und  Munitionsfabriken  in  Berlin. 
Deutsch-Uberseeische  Elektrizitats-Gesellschaft  in  Berlin. 
Felten  &  Guilleaume-Lahmeyerwerke,  A.-G.,  Miilheim. 
Kraftubertragungswerke  in  Rheinfelden. 
Kohl,  M.,  A.-G.  in  Chemnitz. 
Ludw.  Loewe  &  Co.,  A.-G.,  Berlin. 

Maschinenbau-A.-G.  Markt-Redwitz  vorm.  H.  Rockstroh. 
Norddeutsche  Seekabelwerke  in  Koln-Nordenham. 
Orenstein  &  Koppel,  A.-G.  fur  Kleinbahnen  etc. 
Rheinisch-Westfalische  Elektrizitats-A.-G.  in  Essen. 
Wanderer,  Fahrradwerke  vorm.  Winkelhofer  &  Janicke 
in  Schonau. 

CHEMICALS. 
Gehl  &  Co.,  A.-G.  in  Dresden. 

TEXTILES. 

Erdmannsdorfer    A.-G.    fiir    Flachsgarn-Maschinenspin- 

nerei  u.  Weberei. 
Vereinigte  Strohstoffabriken,  Dresden. 

PAPER. 

A.-G.  Kartonnagenindustrie  in  Loschwitz  bei  Dresden. 

FOODS   AND   DRINKS. 

Aktien-Bierbrauerei  zu  Reisewitz  bei  Dresden-Lobtau. 
Sachsische  Malzfabrik  in  Dresden-Plauen. 

COMMERCIAL   ENTERPRISES. 

Allgemeine  Boden-A.-G.  zu  Berlin. 
Banque  de  Mulhouse  in  Miilhausen  i.  Els. 
Baubank  fiir  die  Residenzstadt  Dresden. 
Berlinische  Boden-Gesellschaft,  Berlin. 
Berlinische  Boden-Credit-A.-G.  Berlin. 
Berliner  Maklerverein,  Berlin. 
Bodengesellschaft  Kurfiirstendainm,  Berlin. 

Centralbank  fiir  Eisenbahnwerte,  Berlin. 
Deutsche  Orientbank,  A.-G.,  Berlin. 
Deutsche  Sudamerikanische  Bank,  Berlin. 
Eisenbahnbank,  Frankfort  on-the-Main. 


9I2 


The     German     Great    Banks 


Representation  of  the  great  banks  on  the  supervisory  boards  of  stock  com- 
panies— Continued. 

DRESDNER  BANK— Continued. 


Seats  on  the  supervisory 
board. 


Class  of  industry. 


One 

One  (vice-chairman) 

One 

Two  (vice-chairman) 

One  (chairman) 

Two  (chairman) 

One 

One 

One. 

Two 

Two     (vice-chairman     and 
chairman). 

Two 

Two  (vice-chairman) 

One 

Two  (chairman) 

One 

One 

One.  . 


One, 
One. 


One, 


One  (chairman) 

Two  (chairman) 


One  (vice-chairman) .... 
One  (chairman) 

One  (vice-chairman)  .... 

One 

One  (chairman) 

One  (chairman) 

One  (chairman) 

One  (vice-chairman)  .... 
One.  . 


COMMERCIAL  ENTERPRISES— -continued. 
Eisenbahn-Rentenbank,  Frankfort  on-the-Main. 
Gesellschaft  f iir  elektrische  Unternehmungen,  Berlin. 
Markische  Bank,  Bochum. 
Mecklenburgische  Bank,  Schwerin  i.  M. 
Norddeutsche  Lagerhaus-A.-G.,  Berlin. 
Preussische  Pfandbriefbank,  Berlin. 
Rheinische  Bank  in  Essen. 

Rheinisch-Westfalische  Boden-Credit-Bank,  Cologne. 
Sachsische  Boden-Creditanstalt  in  Dresden. 
A.  Schaaffhausen'scher  Bankverein,  Cologne. 
Schmargendorfer  Boden-A.-G. 

Schwarzburg,  Hypothekenbank  in  Sondershausen. 
Schwarzburg,  Landesbank  in  Sondershausen. 
Terrain-Gesellschaft  Berlin-Siidwesten. 
Terrain-Gesellschaft  am  Centralviehof,  A.-G. 
Terrain-Gesellschaft  Dresden-Slid. 
Terrain-Gesellschaft  Park  Witzleben,  Berlin. 
Wiirttemberg.  Landesbank,  Stuttgart. 

INSURANCE   ENTERPRISES. 

"Allianz,"  Versicherungs-A.-G.,  Berlin. 

"Deutscher  Anker,"  Pensions- und  Lebensversicherungs- 

A.-G.,  Berlin. 
Magdeburger  F'euerversicherungs-Gesellschaft. 

TRANSPORTATION   ENTERPRISES. 

Berlin-Charlottenburger  Strassenbahn,  Berlin. 
Continental  Eisenbahn-Bau-  und  Betriebs-Gesellschaft, 

Berlin. 

Deutsch-Atlantische  Telegraphen-Gesellschaft,  Cologne. 
Deutsch  -  Niederlandische      Telegraphen  -  Gesellschaft, 

Cologne. 

Dux-Bodenbacher  Eisenbahn,  Vienna. 
Gross  Berliner  Strassenbahn,  Berlin. 
Lausitzer  Eisenbahn-Gesellschaft,  Sommerfeld. 
Osteuropaische  Telegraphen-Gesellschaft,  Berlin. 
Sachsisch  -  Bohmische      Dampfschiffahrts  -  Gesellschaft, 

Dresden. 

Strasseneisenbahn-Gesellschaft  in  Hamburg. 
Westliche  Berliner  Vorortbahn,  Berlin. 


903 1 1   — 1 1- 


-59 


913 


National    Monetary     Commission 


Representation  of  the  great  banks  on  the  supervisory  boards  of  stock  com- 
panies —  Continued  . 


DRESDNER  BANK—  Continued. 


Seats  on  the  supervisory 
board. 


Class  of  industry. 


One  (vice-chairman) 

One 

One 

One.  . 


One 

One 

One.. 


One  (chairman) 
One.. 


HOSTELRY  AND  TAVERN   ENTERPRISES. 

Deutsche  Eisenbahn-Speisewagen-Gesellschaft,  Berlin. 
A.-G.  vorm.  Speyr  &  Co.,  Basle. 
Bank  f  iir  Orientalische  Eisenbahnen  in  Zurich. 
Betriebs-Gesellschaft     fiir     Orientalische     Eisenbahnen 

Vienna. 

Belgische  Eisenbahnbank,  Brussels. 
Deutsch-Asiatische  Bank,  Shanghai. 
Gen.  Mining  and  Finance-Comp.,  Ltd.,  Johannesburg, 

London. 

Gewerkschaft  "Brucher  Kohlenwerke"  in  Teplitz. 
Schweizerische  Gesellschaft  fiir  nordamerikanische  Werte 

in  Basel. 


NATJONALBANK  FUR  DEUTSCHLAND. 


One. 
One. 
One. 
One. 
One. 
One. 
One. 


One  (chairman) 
One.  . 


One. 

One, 
One. 
One. 


One. 


One. 
One. 


One  (vice-chairman) 


MINING,  SMELTING,  AND   SALT   WORKS. 

Alkaliwerke,  Ronnenberg,  Hanove*. 
Bergbau-Gesellschaft  "Teutonia,"  Hanover. 
"Bismarckhiitte"  in  Bismarckhiitte. 

Deutsch-Luxemb.  Bergwerks-u.  Hiitten-A.-G.  inBochum. 
Kamerun-Bergwerks-A.-G.,  Berlin. 
Lothringer  Hiittenverein  Aumetz-Friede. 
Oberschlesische    Eisenindustrie,    A.-G.    f.     Bergbau    u. 

Hiittenbetrieb  in  Gleiwitz. 

Oberschlesische  Zinkhiitten,  A.-G.  in  Kattowitz. 
"Phonix,"  A.-G.  fiir  Bergbau  u.   Hiittenbetrieb,  Duis- 

burg. 
Rheinische  A.-G.  fiir  Braunkohlen-  u.  Brikettindustrie  in 

Harrem  und  Koln. 

Schantung  Bergbau-Gesellschaft  in  Berlin. 
Styrumer  Eisenindustrie  A.-G.  in  Liqu.,  Oberhausen. 
Zechau-Kribitzsche     Kohlenwerke     "Gliickauf,"    A.-G., 

Zechau  i.  S. 

STONES   AND   EARTHS. 

A.-G.    fiir    Asphaltierung    u.    Dachbedeckung    vorm.    J. 

Jeserich,  Charlottenburg. 

"Adler,"  deutsche  Portland-Cementfabrik,  A.-G.,  Berlin. 
Oberschlesische  Schamottefabrik  friiher  "Didier"  A.-G. 

Gleiwitz. 
Schomburg,  H.,  &  Sohne,  A.-G.,  Berlin. 


914 


The     German     Great     Banks 


Representation  of  the  great  banks  on  the  supervisory  boards  of  stock  com- 
panies— Continued . 

NATIONALBANK  FUR  DEUTSCHLAND— Continued. 


Seats  on  the  supervisory 
board. 


Class  of  industry. 


One. 
One. 
One. 


One. 
One. 
One. 
One. 
One. 
One. 


One. 
One. 
One. 
One, 
One. 
One. 
One 
One 

One 
One 
One 
One 


One 

Two  (chairman). 


One, 
One. 
One 

One 


One 

One  (vice-chairman) 

One 

One.  . 


METAL    WORKING. 

Eisengiesserei  A.-G.  vorm.  Keyling  &  Thomas  in  Berlin. 

K.  Kastner,  A.-G.  in  Leipzig. 

Schwelmer  Eisenwerk  Miiller  &  Co.,  A.-G.,  Schwelm. 

MACHINE    CONSTRUCTION   AND   INSTRUMENT   MAKING. 

A.-G.  H.  F.  Eckert  in  Berlin-Friedrichsberg. 
Allgemeine  Elektrizitats-Gesellschaft  in  Berlin. 
Berliner  Elektrizitatswerke. 

Brandenburgische  Carbid-  u.  Elektrizitatswerke,  Berlin. 
Breslauer  A.-G.  fur  Eisenbahnwagenbau  in  Breslau. 
Deutsch-Niederlandische   Telegraphen  -  Gesellschaf t,  Co- 
logne. 

Deutsche  "Niles"-Werkzeugmaschinenfabrik,  Berlin. 
Deutsche  Ueberseeische  Elektrizitats-Gesellschaft,  Berlin. 
Deutsche  Waffen-  u.  Munitionsfabriken,  Berlin. 

F.  Dippe,  Maschinenfabrik,  A.-G.  in  Schladen  a.  Harz. 
J.  Frerichs  &  Co.,  A.-G.  in  Osterholz. 
Kraftiibertragungswerke  Rheinfelden. 

Ludw.  Loewe  &  Co.,  A.-G.,  Berlin. 

Oberschlesische  Eisenbahnbedarfs-A. -G.  Friedenshiitte, 
Upper  Silesia. 

G.  Sauerbrey,  Maschinenfabrik,  A.-G.,  Stassfurt. 
Schlesische  Elektrizitats-Gesellschaft,  Breslau. 
Telefonfabrik,  A.-G.,  vorm.  Jul.  Berliner  zu  Hannover. 
Waggonfabrik,  A.-G.,  Rastatt. 

CHEMICAI,. 

Chemische  Fabrik  Honningen,  vorm.  Walther  Fulda  &  Co. 
Chemische  Werke  vorm.  Dr.  Heinrich  Byk,  Berlin. 

ILLUMINANTS,  SOAPS    FATS,  OILS,  AND    VARNISHES. 

Celle-Wietze,  A.-G.  fur  Erdolgewinnung  in  Hannover. 
Deutsche  Mineralolindustrie,  A.-G.,  Berlin. 
Deutsche  Petroleum-A.-G.,  Berlin. 

LEATHER. 

Leipziger  Gummiwarenfabrik  vorm.  Jul.  Marx,  Heine  & 
Co. 

FOODS   AND   DRINKS. 

Aktien-Brauerei  Friedrichshain,  Berlin. 
Berliner  Bockbrauerei,  Berlin. 

Bierbrauerei,  A.-G.,  vorm.  Gebr.  Hugger  in  Posen. 
Bierbrauerei  A.  Schitferer,  A.-G.  in  Kiel. 


915 


National    Monetary     Commission 


Representation  of  the  great  banks  on  the  supervisory  boards  of  stock  com- 
panies— Continued. 

NATIONALBANK  FUR  DEUTSCHLAND— Continued. 


Seats  on  the  supervisory 
board 


Class  of  industry. 


One, 
One. 
One. 


One. 
Two, 


One.  . 
One.  . 
One.  . 
One.  . 


One. 
One. 
One. 
One. 
One. 


One 

Two  (vice-chairman). 

Two  (director) 

One 

One 

Two 

One 

One 

One 

Two  (chairman) 

One 

One 

One 

One 

One 

One.  . 


One. 


FOODS  AND  DRINKS — continued. 

Breslauer  Aktien-Malzfabrik,  Breslau. 
Deutsche  Bierbrauerei,  A.-G.  in  Berlin. 
Rositzer  Zuckerraffinerie,  Rositz  (S.-A.). 

BUILDING   TRADES. 

Tiefbau-  u.    Kalteindustrie,    A.-G.,    vorm.    Gebhardt    & 

Koenig,  Nordhausen. 
"Union,"  Baugesellschaft  auf  Aktien  in  Berlin. 

ART   INDUSTRY. 

A.-G.  H.  Gladenbeck  &  Sohn,  Bildgiesserei,  Berlin. 
R.  W.  Dinnendal,  A.-G.,  Kunstwerkerhutte  bei  Steele. 
Kunstanstalt  B.  Gross,  A.-G.  in  Leipzig. 
H.  Schott,  A.-G.  in  Rheydt. 

COMMERCIAL  ENTERPRISES. 

A.-G.  fur  Montanindustrie,  Berlin. 

Bank  fur  Brauindustrie,  Berlin. 

Berliner  Maklerverein,  Berlin. 

Boden-A.-G.  Berlin-Nord,  Berlin. 

Boden-Gesellschaft    an    der    Kreisbahn    Berlin-Nordost, 

Berlin, 

Deutsch-Asiatische  Bank,  Berlin. 
Deutsche  Orientbank,  A.-G.,  Berlin. 
Deutsch-Siidamerikanische  Bank,  Berlin. 
Deutsche  Treuhand-Gesellschaft,  Berlin. 
Gesellschaft  fur  elektrische  Unternehmungen,  Berlin. 
Handelsstatte  "Bellealliance,"  A.-G.,  Berlin. 
Industriegelande  Schoneberg,  Berlin. 
Neue  Boden-A.-G.,  Berlin. 
Norddeutsche  Creditaiistalt,  Konigsberg  i.  Pr. 
Norddeutsche  Immobilien-A.-G.,  Berlin. 
Preussische  Pfandbriefbank,  Berlin. 
Rheinisch-Westfalische  Boden-Creditbank,  Cologne. 
Stansdorfer  Terrain- A.-G.  am  Teltowkanal,  Berlin. 
Teltower  Boden-A.G.  zu  Berlin. 
Terrain-A.-G.  Miinchen  Nord-Ost,  Munich. 
Terrain-Gesellschaft     am     neuen     Botanischen     Garten 

Berlin. 

INSURANCE   ENTERPRISES. 

"Deutscher   Anker,"    Pensions-   u.    Lebensversicherung 
Berlin. 


T1  L 


The     German     Great     Banks 


Representation  of  the  great  banks  on  the  supervisory  boards   of  stock 
panics — Continued. 

NATIONALBANK   FUR  DEUTSCHLAND— Continued. 


Seats  on  the  supervisory 
board. 


Class  of  industry. 


One 


One 

One 

One 

One 

One  (vice-director) 

One 

One 

One.  . 


One 

One.  . 


One 

One 

One.  . 


One 
One, 


One 


TRANSPORTATION    ENTERPRISES. 

Deutsch-Siidamerikanische  Telegraphen-Gesellschaf t ,  Co- 
logne. 

S.  Eichelbaum,  Transport-A.-G.,  Breslau. 
Grosse  Berliner  Strassenbahn. 
Kamerun-Eisenbahn-Gesellschaft  zu  Berlin. 
"Midgard,"  Deutsche  Seeverkehrs- A. -G.  in  Bremen. 
Niederlausitzer  Eisenbahn-Gesellschaft,  Berlin. 
Osteuropaische  Telegraphen-Gesellschaft,  Cologne. 
Santa  Katharina-Eisenbahn-Gesellschaft,  Berlin. 
Schantung-Eisenbahn-Gesellschaft,  Tsingtau. 

PLANTATION    COMPANIES. 

Guatemala-Plantagen-Gesellschaft,  Hamburg. 
Osma-Rochela-Plantagen-Gesellschaft,  Hamburg. 

FOREIGN   COMPANIES. 

Bank  fur  elektrische  Unternehmungen  in  Zurich. 

Credito  Italiano,  Genoa. 

Compagnie  Metallurgique    Franco-Beige    de  Martagnea, 

Brussels. 

Orientbank,  A.-G.,  Athens. 
Rumanische  A.-G.  fiir  Industrie  "Konigreich  Rumanien," 

Campina. 
Ungarische  Lokaleisenbahnen-A.-G.  in  Budapest. 


A.  SCHAAFFHAUSEN'SCHER  BANKVEREIN. 


Two  (chairman) . 


One 

One  (chairman) 

One 

One 

One 

One  (chairman) 


One 

One 

Six  (chairman) 

Two  (chairman) 


MINING,  SMELTING.  AND  SALT   WORKS. 

Bergwerks-Gesellschaft    "Aller    Nordstern"    m.    b.    H, 

Gr.-Hauslingen. 

Bergwerks-Gesellschaft   'Gliickaufsegen"  in  Horde. 
Bergwerks-Gesellschaft  "Trier"  m.  b.  H.  in  Hamm. 
Deutsch-Luxemburg.     Bergwerks-    u.    Hiitten-A.-G.    in 

Bochum. 

Eschweiler  Bergwerksverein  in  Eschweiler-Pumpe. 
Gelsenkirchener  Bergwerks- A.-G. 
Gewerkschaft   der   Zeche    Blankenburg   in    Hammerthal 

a  d.  Ruhr. 

Gewerkschaft  "Zukunft",  Cologne. 
Harpener  Bergbau-A.-G.  in  Dortmund. 
Internationale  Bohrgesellschaft  Erkelenz. 
Internationale  Kohlenberg werks- A.-G.,  St.  Avoid. 


917 


National     Monetary     Commissio 


n 


Representation  of  the  great  banks  on  the  supervisory   boards   of  stock  com- 
panies— Continued . 

A.   SCHAAFFHAUSEN'SCHER  BANKVEREIN— Continued. 


Seats  on  the  supervisory 
board. 


Class  of  industry. 


One  (chairman) 

One.  . 


One 

One 

One 

One.  . 


One 


One  (vice-chairman)  .... 
One.  . 


One  (vice-chairman) 
One  (vice-chairman) 


One  (chairman)  .  . 
One.  . 


One 

One 

One 

One 

Two  (chairman) 

One  (chairman) 

One 

One 

One  (vice-chairman) 

One  (chairman) 

One.  . 


One, 
One, 


One, 
One 


MINING,  SMEI/TING,  AND  SALT  WORKS — continued. 

Lothringer  Hiittenverein  Aumetz-Friede  in  Kneuttingen 

i.  L. 
"Phonix,"  A.-G.  fur  Bergbau  u.  Hiittenbetrieb,  Duisburg- 

Ruhrort. 

Rheinische  Wasserwerks-Gesellschaft,  Cologne. 
Rombacher  Hiittenwerke,  Cologne. 

Sieg-Rhein.  Hiitten-A.-G.  zu  Friedrich  Wilhelmshiitte. 
Vereinigte  Stahlwerke  v.  d.  Zypen  &  Wissen  Eisenhiitte, 

Cologne-Deutz. 
Zechau-Kriebitzsche     Kohlenwerke     "Gliickauf,"  A.-G., 

Zechau  (S.-A.). 

STONES   AND   EARTHS. 

A.-G.  fur  Rhein.-Westfal.  Cementindustrie  in  Beckum. 
Weseler  Portland-Cement-  u.  Tonwerke  in  Wesel. 

METAIy   WORKING. 

Eschweiler-Koln.  Eisenwerke,  A.-G.  in  Eschweiler. 

Faconeisen-Walzwerk  L.  Mannstaedt  &  Cie.,  Kalk,  near 
Cologne. 

Schwelmer  Eisenwerk  Mullet  &  Co.,  Schwelm  (West- 
phalia). 

Stahlwerk  "Krieger,"  A.-G.  in  Dusseldorf. 

MACHINE     CONSTRUCTION     AND     INSTRUMENT     MAKING. 

Allgemeine  Elektrizitatsgesellschaft  in  Berlin. 
Anker-Werke,  A.-G.,vorm.Hengstenberg  &  Co.,  Bielefeld. 
Bergmanns  Elektrizitatswerke,  A.-G.,  Berlin. 
Deutsche  Waffen-  und  Munitionsfabriken,  Berlin, 
de  Fries  &  Co.,  A.-G.,  Dusseldorf. 
Gasmotorenfabrik  '  Deutz." 
Gesellschaft  fiir  elektrische  Unternehmungen. 
Kottbuser  Maschinenbauanstalt  u.  Eisengiesserei,  A.-G. 
Maschinenbauanstalt  Humboldt,  Kalk,  near  Cologne. 
A.-G.   Maschinenfabrik   "Deutschland"   in  Dortmund. 
Waggonfabrik  A.-G.,  vorm.  P.  Herbrandt  &  Co.,  Cologne- 

Ehrenfeld. 

Waggonfabrik,  A.-G.,  Uerdingen. 
Walther    &    Co.,    Commandit-Gesellschaft    auf    Aktien, 

Delbriick,  near  Cologne. 
Werkzeugmaschinenfabrik   Gildemeister     &     Co.,  A.-G., 

Bielefeld. 
Weyersberg,  Kirschbaum  &  Co.,  A.-G.    fiir    Waffen    u. 

Fahrradteile  in  Solingen. 


918 


The     German     Great     B 


an 


k 


Representation  of  the  great   banks  on  the  supervisory  boards  of  stock  com- 
panies— Continued. 

A.  SCHAAFFHAUSEN'SCHER  BANKVEREIN— Continued. 


Seats  on  the  supervisory 
board. 


Class  of  industry. 


One  (vice-chairman) 
One.  . 


Two  (chairman) 


One  (vice-chairman) 

One 

Two  (chairman).  .  .  . 
One  (chairman) .... 


One 


Two  (chairman).  . 


One 

One  (chairman) 


One  (chairman) 

One  (vice-chairman)  . 

One  (chairman) 

One  (vice-chairman)  . 

One 

Three 

Two  (vice-chairman). 

Two 

One 

One  (chairman) 

Two 

One  (chairman) 

One 

One 

One 

Two  (vice-chairman). 

One 

One  (vice-chairman)  . 


CHEMICAL,. 

A.-G.  fur  chemische  Industrie  in  Gelsenkirchen-Schalke. 
Chemische  Fabrik  Honningen,  vorm.  Walther  Feld  &  Co., 
A.-G. 

ILLUMINANTS,  SOAPS,  FATS,  OILS,  AND  VARNISHES. 

Deutsche  Mineralol-Industrie,  A.-G.,  Cologne. 
TEXTILES. 

Diilkener  Baumwollspinnerei,  A.-G.  in  Dulken. 
Kref elder  Teppichfabrik,  A.-G.,  Krefeld. 
Rhein.  Kunstseidefabrik,  A.-G.,  Cologne. 
Schollersche    und    Eitorfer    Kammgarnspinnerei,    A.-G. 
Breslau. 

FOODS   AND    DRINKS. 

Rositzer  Zuckerraffinerie  in  Rositz. 

BUILDING   TRADES. 

A.-G.    fur   Briickenbau,   Tiefbohrung   u.    Eisenkonstruk- 

tionen  in  Neuwied. 
Rhein.  Baugesellschaft,  Cologne. 
Tiefbau   u.    Kalteindustrie,   vorm.    Gebhardt   &    Konig, 

Nordhausen. 

ART   INDUSTRY. 

W.  Hagelberg,  A.-G.,  Berlin  (Art  prints). 
COMMERCIAL   ENTERPRISES. 

A.-G.  fur  Rhein.-Westfal.  Industrie,  Cologne. 

Alexanderwerk,  A.  v.  d.  Nahmer,  A.-G.  in  Remscheid. 

Allgemeine  Boden-A.-G.  in  Berlin. 

Bank  fiir  deutsche  Eisenbahnwerte  in  Berlin. 

Deutsche  Orientbank,  A.-G.,  Berlin. 

Deutsch-Siidamerikanische  Bank,  A.-G.,  Berlin. 

Dresdner  Bank  in  Dresden. 

Diisseldorfer  Baubank  in  Diisseldorf. 

Kolner  Verlagsanstalt  u.  Druckerei,  A.-G.,  Cologne, 

Mittelrhein.  Bank,  Koblenz. 

Neue  Boden-A.-G.,  Berlin. 

Oldenburg.  Landesbank. 

Ostbank  fiir  Handel  u.  Gewerbe,  Posen. 

Preussische  Pfandbriefbank,  Berlin. 

Rheinische  Bank,  Essen  on-the-Ruhr. 

Rhein.-Westf.  Boden-Creditbank,  Cologne. 

Schwarzburg.  Hypothekenbank  in  Sondershausen. 


919 


National    Monetary     Commission 


Representation  of  the  great  banks  on  the  supervisory  boards  of  stock  com- 
panies— Continued . 

A.  SCHAAFFHAUSEN'SCHER  BANKVEREIN— Continued. 


Seats  on  the  supervisory 
board. 


Class  of  industry. 


One 

One 

Two  (chairman). 


One, 


One 

One 

One 

One 

One  (chairman) .  . 


One  (vice-chairman) 

One 

One 

One  (chairman) .... 
One  (chairman) .... 
One  (vice-chairman) 
One  (vice-chairman) 
One  (vice-chairman) 
One  (chairman)  .... 
One  (chairman) .... 
One  (chairman) . 


One 
One 


One  (vice-chairman) 

One 

One 

One.  . 


COMMERCIAL  ENTERPRISES — continued. 

Schwarzburg.  Landesbank,  Sondershausen. 
Treuhand-Vereinigung,  A.-G.,  Berlin. 
Westfalisch-Lippische  Vereinsbank  in  Bielefeld. 

INSURANCE   ENTERPRISES. 

"Rhenania,"  Versicherungs-A.-G.  in  Cologne. 

TRANSPORTATION    ENTERPRISES. 

A.-G.  fiir  Verkehrswesen  in  Berlin. 
Badische  Lokaleisenbahnen-A.-G.  in  Karlsruhe. 
Berlin-Char lottenburger  Strassenbahn,  Berlin. 
Braunschweig.  Landeseisenbahn-Gesellschaft. 
Braunschweig  -  Schoninger     Eisenbahn  -  Gesellschaft     in 

Braunschweig. 

Brohltal-Eisenbahn-Gesellschaft,  Cologne. 
Grosse  Berliner  Strassenbahn,  Berlin. 
Kamerun-Eisenbahn-Gesellschaft  zu  Berlin. 
Moselbahn-A.-G.  in  Trier. 

Modrath-Liblar-Briihler  Eisenbahn-A.-G.,  Cologne. 
Rinteln-Stadthagener  Eisenbahn-Gesellschaft  in  Rinteln. 
Schlesische  Dampfer-Compagnie  in  Breslau. 
Schlesische  Kleinbahn  A.-G.  in  Kattowitz. 
Vereinigte  Westdeutsche  Kleinbahn -A.-G.,    Cologne. 
Westdeutsche  Eisenbahn-Gesellschaft,  Cologne. 
Wurttembergische  Nebenbahnen-A.-G.,  Stuttgart. 

FOREIGN    COMPANIES. 

Banque  Internationale  de  Bruxelles  in  Brussels. 

Foraky  Soc.  au  Beige  de  1'Entreprise  de  Forage  et  de 

Foncage,  Brussels. 

Rumanische  A.-G.  fiir  Industrie,  Konigreich  Rumanien. 
Schantung-Eisenbahn-Gesellschaft  in  Tsingtau. 
Societa  Italiana  Langen  &  Wolf,  Milan. 
Societe  Francaise  de  Forage  et  de  Recherches  Minieres 

(Brevet  Raky),  Paris. 


920 


he     German     Great     Banks 


APPENDIX  V. 

TOTAL  VALUE  OF  SECURITIES  ISSUED  AT  THE  BERLIN  STOCK 
EXCHANGE    BY   THE   GREAT   BANKS  DURING  THE  YEARS 

1882-1908. 

BANK  FtfR  HANDEL  UNI>   INDUSTRIE. 

Total  value  of  securities  issued  at  the  Berlin  stock  exchange  during  the  years 

1882-1908. 

[To  page  395.] 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.b 

Issued 
jointly  with 
other  banks 
and  great 
banks.  & 

1882  

Marks. 

Marks. 

Marks. 

Marks. 

1883  

I  i,  600,  ooo 

20,  ooo,  ooo 

1884  

12,  850,  OOO 

1885  
1886  
1887  

?i.  757.  200 

IO,  OOO,  OOO 

209,  512,  800 

10,  OOO,  OOO 

75,380,800 

1888  

87  852  800 

1889  

1890. 

1891  

1892  

1893. 

1894  

1895  
1896. 

19,873.  500 

39,000,000 

40,  234,  525 

I  IO,  OOO,  OOO 

1897  

1898  

112,  386,  OOO 

2  I,  7SO,  OOO 

14,  703  ,  ooo 

125,  ooo,  ooo 

1899.  . 

1900  

8   200  ooo 

83  ,  139    500 

247,  400,  ooo 

1901 

1902  

1903  

284,  050,  ooo 

30,  ooo,  ooo 

i  ,  250,  ooo 

3,  434,  609,  074 

1904 

I97   723    57o 

1905  

80,  250,  ooo 

2  1  ,  4OO,  OOO 

820,  6  1  i  ,  ooo 

1906 

1907  .  .  . 

i  18,  ooo,  ooo 

9,  750,  ooo 

6,  584,  065  ,  232 

1908  

9,  3  10,  ooo 

136,  2OO,  OOO 

3  ,  300,  ooo 

565  ,  600,  ooo 

a  Only  those  years  are  given  during  which  issues  were  made. 
b  Including  private  banking  firms. 


921 


National    Monetary     Commission 

Value  of  securities  issued  and  listed  at  the  Berlin  stock  exchange  during  the 
years  1882-1908. 


GERMAN  PUBLIC  SECURITIES. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.  b 

Issued 
jointly  with 
other  banks 
and  great 
banks.  & 

1882  

Marks. 
4,  500,  ooo 

Marks. 

Marks. 

Marks. 

1884 

1886  

1887  

IO,  OOO,  OOO 

1888 

1889  

4,  040,  ooo 

1890 

1891  

1892  

1893 

1894  
1895  
1896  

13,  ooo,  ooo 
16,  280,  700 

39,034-525 

10,  000f  000 

1897  

98,  250,  ooo 

1898 

1899  

21  ,  SOO,  OOO 

.-    7.  500,  ooo 

4,939,  5oo 

27,  700,  ooo 

1901  

1902  

1903  

1904  

1905  

9,  ooo,  ooo 

1906  

9,017,20 

,000,00 

1908        .    .    . 

7,000,000 

2,250,000 

24,500,00 

190,000,000 

FOREIGN  PUBLIC  SECURITIES 


1886  

51  ,  757  200 

1887  

1888  '  

1889  

74,  20,00 

1890  

28 

1891  
1893  

34,  650,  400 

50,  750,000 

1895  

1896  

1898.., 

^  I  .  OOO.  OOO 

o  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


922 


The     German     Great     Banks 

Value  of  securities  issued  and  listed  at  the  Berlin  stock  exchange  during  the 
years  1882-1908 — Continued. 

FOREIGN  PUBLIC  SECURITIES— Continued. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 

jointly  with 
other  banks.6 

Issued 
jointly  with 
other  banks 
and  great 
batiks.6 

1900  

Marks. 

Marks. 

Marks. 

Marks. 

1901  

102,000,000 

1902  

1903  

280,  ooo,  ooo 

1904  . 

1905  

1906  
1907    . 

80,  ooo,  ooo 

48,  480,  ooo 

28,  350,  ooo 

1908  

GERMAN  MORTGAGE  BONDS. 


1888  

30,  ooo,  ooo 

1889  

IO,  OOO,  OOO 

1896  

20,  ooo,  ooo 

1897  

i  15,  ooo,  ooo 

1898  

55  i  300  ooo 

1900  . 

1902  
1903  

26,  040,  700 

10,  000,  000 

20,  ooo  ooo 



1904 

1905  

1906  

25  ,  ooo,  ooo 

FOREIGN  MORTGAGE  BONDS. 


1896 

1807  

5  i  ,  ooo,  ooo 

GERMAN  RAILWAY  SHARES. 


1896 

i  ,  800,  ooo 

1897 

i  ,  250,  ooo 

1898 

1000.  .  , 

13,150,00 

I,  200,  000 

a  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banding  firms. 


923 


National    Monetary     Commission 


Value  of  securities  issued  and  listed  at  the  Berlin  stock  exchange  during  the 
years  1882-1908  —  Continued. 

GERMAN  RAILWAY  SHARES—  Continued. 

Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.  & 

Issued 
jointly  with 
other  banks 
and  great 
banks.*" 

Marks. 
i  i  ,  450,  ooo 

Marks. 

Marks. 

Marks. 

2  ,  OOO,  OOO 

14,  297,  ooo 
4,  024,  ooo 

II,  000,  000 

1908  

FOREIGN  RAILWAY  SHARES. 

1888 

1890 

49,  600,  ooo 

1892 

5  ,  600,  ooo 

GERMAN  RAILWAY  BONDS. 

!888                        

2,  500,  ooo 

1890 

1897 

5  ,  700,  ooo 

2,  500,  000 

3,  ooo,  ooo 

5,500,000 

4,  ooo,  ooo 
5,  ooo,  ooo 
4,  500,  ooo 

1906          

7,  ooo,  ooo 

FOREIGN  RAILWAY  BONDS. 

1882  
1883 

6,  500,  ooo 

1884  
1885  

209,  512,  800 

39,437  
75,  380,  800 

876,489,  740 
in,  288,  750 

31,  175,  020 

52,  800,  ooo 
16,  ooo,  ooo 

IOO,  OOO,  OOO 
100.  OOO.  000 

1886  
1889 

20,  000,  000 

16,  ooo,  ooo 

16,  ooo,  ooo 

1890      

1891  

1892            ... 

1893  

1894 

i8g<;.  . 

a  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


924 


The     German     Great     Banks 


Value  of  securities  issued  and  listed  at  the  Berlin  stock  exchange  during  the 
years  1882-1908 — Continued. 

FOREIGN  RAILWAY  BONDS— Continued. 


1901  

Marks. 

Marks. 

Marks. 

Marks. 
87,  ooo,  ooo 
1,687,500 

1906  

1907  

42,  ooo,  ooo 

GERMAN  STREET  RAILWAY  BONDS. 

1896  

7,  500,  ooo 

BANK  SHARES. 

1882  

6,  ooo,  ooo 

1889  

20,  000,  000 

3  ,  ooo,  ooo 
16   200  ooo 

1896                        .  . 

16,  ooo,  ooo 

1897  

1898 

28,  ooo,  ooo 

8,  ooo,  ooo 
17,  ooo,  ooo 
24,  ooo,  ooo 

1899                     .  . 

1901  

52,  ooo,  ooo 

4,  ooo,  ooo 

1904  

12,  500,  000 

16,  ooo,  ooo 
33,  250,000 

20,  000,  000 

8,  ooo,  ooo 

22,  000,  000 

19,  ooo,  ooo 
3,  400,  ooo 
3  ,  ooo,  ooo 

3,  ooo,  ooo 
18,  ooo,  ooo 

1906  
1907  

1908  

INDUSTRIAL  SCARES. 

1888 

19,  ooo,  ooo 

1889  
1891 

7,000,  ooo 

12,  000,  000 

3,  600,  ooo 
4,  ooo,  ooo 

3,  ooo,  ooo 
13,  ooo,  ooo 
4,  800,  ooo 

1892  
1893  

I,  000,  000 

1,358,  400 
3,  592,  800 
5,  006,  ooo 
2,  944,  ooo 

2,  436,  000 

30,  ooo,  ooo 

1897  
1898.. 

9,  750,  ooo 

20,  000,  000 

a  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


925 


National    Monetary     Commission 

Value  of  securities  issued  and  listed  at  the  Berlin  stock  exchange  during  the 
years  1882-1908 — Continued. 


INDUSTRIAL  SHARES— Continued. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.6 

Issued 
jointly  with 
other  banks 
and  great 
banks.6 

1899 

Marks. 

Marks 
29  ooo  ooo 

Marks. 

2     OOO    OOO 

Marks. 

1900  

5,  200,  ooo 

2,  500,  000 

48,  700,  ooo 

1902  
1903  

25,675,000 
4,  050,  ooo 

I,  000,  000 

5  ,  ooo,  ooo 

i,  500,  ooo 
i  ,  250,  ooo 

28,  ooo,  ooo 

I  2  ,  5OO,  OOO 

10  625  ,  ooo 

3    ooo   ooo 

1905  

26,  ooo,  ooo 

250,  ooo 

i  ,  400,  ooo 

80,  3  i  i  ,  ooo 

1907  
1908 

5,  ooo,  ooo 

30,  ooo,  ooo 

7,  500,  ooo 

43  ,  ooo,  ooo 

INDUSTRIAL  BONDS. 


1883  
1884 

II,  600,  000 

x889  

I  I  ,  OOO,  OOO 

1892 

6 

1893  

1895  

I  ,  2OO,  OOO 

1898 

1900  

1901  
1902  

26,  ooo,  ooo 

23  ,  ooo,  ooo 

1903  

I  ,  OOO,  OOO 

1904  
1905  

14,  ooo,  ooo 

IO,  OOO,  OOO 

4,  500,  ooo 

1906 

1907  

1908 

a  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


926 


The     German     Great     Banks 


BERLINER  HANDELS-GESELLSCHAFT. 

Total  value  of  securities  issued  at  the  Berlin  Stock  Exchange  during  the  years 

1882-1908. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.b 

Issued 
jointly  with 
other  banks 
and  great 
banks.& 

1883  

Marks. 
35,  730,  ooo 

Marks. 

Marks. 

12,  OOO,  OOO 

Marks. 

1884  

35,  486,  380 

14,  225,  ooo 

196,  043,  82O 

1885 

60,  975  ooo 

1886  
1887  

1888 

57.975.00° 

173.  015,  °°° 

i  7,  900,  ooo 

16,  ooo,  ooo 

519,  249,  720 
21,  000,  000 

48,  645,  ooo 
96,  726,  500 

1889.    .    ... 

62,  198,  600 

204,  ooo,  ooo 

1890 

1891  

3,  716,  ooo 

3,  600,  ooo 

7,  ooo,  ooo 

473,  770,  ooo 

1892 

15  ,  ooo,  ooo 

14,  600,  ooo 

40,  400  ooo 

1893  

1894 

i  ,  050,  ooo 
8,  313  ooo 

6,  ooo,  ooo 
7,  ooo,  ooo 

14,  350,  800 

117,  ooo,  ooo 

1895 

13,  025  ,  ooo 

42,  ooo,  ooo 

62,  233  ,  ooo 

1896  
1897  

339.936,520 

25,  848,  ooo 

4,  800,  ooo 
29,  350,  ooo 

55,  056,  600 
65,  685,  500 

172,  236,  ooo 
288,  760,  ooo 

1898 

13  ,  980,  ooo 

69,  700,  500 

40,  700,  ooo 

313  t  598,  500 

1899  
1900  

19,  600,  ooo 
10,  500,  ooo 

85,  ooo,  ooo 

15,  200,  000 

85,  198,  ooo 
28,  500,  ooo 

155,  ioo,  ooo 
104,  300,  ooo 

4,  ooo,  ooo 

54,  200,  ooo 

235,  ooo,  ooo 

1902  
1903  

171,  508,  800 
10,  225,  ooo 

73,  300,  ooo 
63,  ooo,  ooo 

22,  350,  OOO 

16,  ioo,  ooo 

478,  800  ooo 
3,  396,  623,  974 

1904 

19,  ooo,  ooo 

35,  500,  ooo 

38,  250,  ooo 

65,  ioo,  ooo 

1905  
1906  

28,  350,  ooo 

21,  173,  750 

112,  ISO,  OOO 

69,  ioo,  ooo 

5,  ooo,  ooo 

604,  ooo,  ooo 
254,  309,  ooo 

1907  
1908  

8,  ooo,  ooo 
18,  ooo,  ooo 

73,  296,  ooo 
69,  910,  ooo 

24,  920,  ooo 
62,  ooo,  ooo 

6,591.435.232 

438,  920,  ooo 

o  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


927 


National     Monetary     Commission 

Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908. 

GERMAN  PUBLIC  SECURITIES. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.b 

Issued 
jointly  with 
other  banks 
and  great 
banks.** 

1883 

Marks. 

Marks. 

Marks. 

Marks. 

1888 

40,  ooo,  ooo 

Z889             

3,  500,  ooo 

1890 

1891 

450,  ooo,  ooo 

1893 

1891 

50,  ooo,  ooo 

1894                       .  .  . 

IO,  OOO,  OOO 

1895  

3  ,  500,  ooo 

10,  500,  ooo 

2,  OOO,  OOO 

1897 

2,  750,  ooo 

1899.                      .    . 

6,  ooo,  ooo 

15,  700,  ooo 

14,  ooo,  ooo 

3  ,  ooo,  ooo 

1904 

27,  ooo,  ooo 

1906 

26,  ooo,  ooo 

1907  

9,  796,  ooo 

I  2,  OOO,  OOO 

20,  ooo,  ooo 

1908.  . 

T,  ,  OOO,  OOO 

60,  ooo,  ooo 

8<;,  ooo.  ooo 

FOREIGN   PUBLIC  SECURITIES. 


1884 

1886  

492,  I  29,  720 

1887 

1888  

304,  620,  ooo 

1889  

170,  520,  ooo 

1890.  . 

148  906,  944 

1892  

i  i  ,  250,  ooo 

1895 

1896  
1898  

287,  786,  520 

46,  406,  500 

1902  ...  . 

393  ooo,  ooo 

1903  

3i  399>  323  >  974 

1905 

1906  

28,  350,  ooo 

1907 

1908.  .  , 

127,  500,  ooo 

a  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


928 


The     German     Great     B 


a  n 


Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908 — Continued. 

GERMAN  MORTGAGE  BONDS. 


Year.a 

Issued 

exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.6 

Issued 
jointly  with 
other  banks 
and  great 
banks.* 

1892  

Marks. 

Marks. 

Marks. 

Marks. 

1894  

1895  

74,    i    ,00 

1896  

20,  ooo,  ooo 

20,000,00 

1898  

25,000,00 

1899  

70,  ooo,  ooo 

1901  

1903  

40,  ooo,  ooo 

1904  

15,  ooo,  ooo 

1905  

1907  .    .    . 

1908  

FOREIGN  MORTGAGE  BONDS. 


1883  

7,  425  ,  ooo 

1886. 

1887  

13  975  ooo 

1893  

10,  600,  800 

1902  

6,  750,  ooo 

1904  

i  i  ,  250,  ooo 

1906 

GERMAN  RAILWAY  SHARES. 


1883  
1884. 

i,  905,  ooo 

I  2,  OOO,  OOO 

1889  

3  ,  150,  ooo 

1891 

1895 

3  ,  ooo,  ooo 

1896 

3,  650,  ooo 

1897.  . 

3,  500,  ooo 

1898 

6,  500,  ooo 

1800 

i  i  ,  050,  ooo 

8,  500,  ooo 

8,  600,  ooo 

1902 

600,  ooo 

1903.  . 

3,  725,000 

o  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


90311' 


929 


National    Monetary     Commission 


Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-iQoS-— Continued. 

GERMAN  RAILWAY  SHARES— Continued. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.6 

Issued 
jointly  with 
other  banks 
and  great 
banks.b 

Marks. 
i  ,  500,  ooo 

Marks. 

Marks. 

Marks. 
5  ,  300,  ooo 

IOO8 

4,  210,  ooo 

I  I,OOO,  OOO 

FOREIGN  RAILWAY  SHARES. 


1883 

25,  486,  380 

i88s 

51  ,  975  ,  ooo 

1888 

144,  ooo,  ooo 

1889 

1892 

1894  

GERMAN   RAILWAY  BONDS. 


1885  

3  ,  ooo,  ooo 

t886    

1893  

i  ,  050,  ooo 

1894  

2,  638,  OOO 

1895  

4,  275  ,  ooo 

1896 

1897  

1898  
1899  

i,  830,  ooo 

10,  000,  OOO 

1900  

14  ooo  ooo 

1901  

1902  

1903  

i  ,  500,  ooo 

1904  

1907  

a  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


930 


The     German     Great     Banks 

Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908 — Continued. 


FOREIGN  RAILWAY  BONDS. 


Year." 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 

jointly  with 
other  banks.6 

Issued 
jointly  with 
other  banks 
and  great 
banks.6 

1883  

Marks. 
8,  400,  ooo 

Marks. 

Marks. 

Marks. 

1884  

1885  

1886  

1887  

149,  040,  ooo 

1889  

18 

7,2      ,500 

1890  

1891  

3    ,ooo,( 

1892  

9,770,00 

1893  

32,000,00 

1894  

60   o   o 

1895    .    .  . 

8*21    'ooo 

1896  

1897  

36   955    500 

1898    

1899  

1900  

1902  

170,  158,  800 

1  906  

I      687      5OO 

GERMAN  STREET  RAILWAY  SHARES. 


1896 

BANK  SHARES. 


1886 

1889 

1891  .      

I,  $00,  000 

1892 

3  ,  ooo,  ooo 

1895  

5  ,  ooo  ooo 

9,  500,  ooo 

3  ,  ooo,  ooo 

1896 

10,  ooo,  ooo 

40,  ooo,  ooo 

1897 

3  498  ooo 

25,  500,  ooo 

1898.  . 

7,  500,  ooo 

8,000,  ooo 

o  Only  those  years  are  given  during  which  issues  were  made. 
6  Including  private  banking  firms. 


93 1 


National    Monetary     Commission 


Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908 — Continued. 


BANK  SHARES— Continued. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 

jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.  b 

Issued 
jointly  with 
other  banks 
and  great 
banks.  b 

1899.  

Marks. 

IO,  OOO,  OOO 

Marks. 

Marks. 
5  ,  ooo,  ooo 

Marks. 

1903  

4,  ooo,  ooo 

1905  

16,  ooo,  ooo 

1907  

1908 

INDUSTRIAL  SHARES. 


1884  

6,  ooo,  ooo 

i  ,  500,  ooo 

1885 

1886  

10,  600,  ooo 

I  ,  2OO  OOO 

1887 

!888  

17.  900,  ooo 

19,  ooo,  ooo 

1889 

1890      

1891  

3  ,  600,  ooo 

I  ,  OOO,  OOO 

1892           .  . 

1893  

1894 

1895   

3  >  75o  ooo 

1896  

12  ,  I5O,  OOO 

4,  800,  ooo 

3  ,  ooo,  ooo 

1897     

1898  
1899  .  . 

3,  250,  ooo 

6,  294,  ooo 

10,  000,  800 

40,  798,  ooo 

1900  
1901  
1902  

3,  ooo,  ooo 

15,  200,  000 

18,  200,  ooo 

I  ,  OOO,  OOO 

6,  ooo,  ooo 

25,  700,  ooo 
5,  ooo,  ooo 
29,  050,  ooo 

1904  

I  ,  OOO,  OOO 

I  I  ,  OOO,  OOO 

35,  ooo,  ooo 

1906  
I9O7  

10,  250,  ooo 
4,  ooo,  ooo 

17,  800,  ooo 
9,  ooo,  ooo 

IS2,  200,  000 

55  ,  870,  ooo 

1908  

«  Only  those  years  are  given  during  which  issues  were  made. 
b  Including  private  banking  firms. 


932 


The     German     Great     Banks 

Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908 — Continued. 


INDUSTRIAL  BONDS. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.  & 

Issued 
jointly  with 
other  banks 
and  great 
banks.  b 

1884  

Marks. 

2,  000,  000 

Marks 
14,  225  ,  ooo 

Marks. 

Marks. 

1887  

1891  

ooo, 

1892  

,000,00 

1893 

1894  

4,  ooo,  ooo 

1895  

8 

5,000,000 

1896 

ii,4   3,oo 

1897  

IO,  OOO,  OOO 

26,  600,  ooo 

28,  730,  ooo 

1898  

1899                  .    . 

0,700,00 

20,000.000 

1900  

7,  500,  ooo 

1901  

1902 

SS.  ooo,  ooo 

1903  

,000,000 

1904  

4,  500,  ooo 

17,300,00 

1905 

,000,00 

1906  

4,  800,  ooo 

20,347,  500 

1908  

i6i'°2o'ooo 

DEUTSCHE  BANK. 


Total  value  of  securities  issued  at  the  Berlin  Stock  Exchange  during  the  years 

1882-1908. 


Year." 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.  & 

Issued 
jointly  with 
'other  banks 
and  great 
banks.  & 

1882 

Marks. 

Marks. 

Marks. 

Marks. 
35,  782,  560 

1883 

14   400,  ooo 

2,  6OO,  OOO 

15,  ooo,  ooo 

1884  
1885 

323,  405,  080 

6,  980,  ooo 

22O,  6l2,  8OO 

17,  400,  ooo 

1886 

I,  678  966,  538 

1887  
1888.. 

69,  460,  ooo 

78,354,  600 

210,  000,  000 
100,  000,  000 

16,  ooo,  ooo 

5,  ooo,  ooo 

7,000,  ooo 
85,  734,  200 

a  Only  th  ose  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


933 


National    Monetary     Commission 


Total  value  of  securities  issued  at  the  Berlin  Stock  Exchange  during  the  years 
1882-1908 — Continued . 


Year.a 

Issued 
exclusively 
by  the  bank. 

Issued 

jointly  with 
other  great 
banks. 

Issued 

jointly  with 
other  banks.  & 

Issued 
jointly  with 
other  banks 
and  great 
banks.6 

!889          

Marks. 
71  ,  ooo,  ooo 

Marks. 
547,  132,  048 

Marks. 
59,  446,  397 

Marks. 
321  ,  080,  ooo 

1890  
1891 

135,  116,  800 
34,  320,  ooo 

34,  910,  400 

3  ,  ooo,  ooo 

401,306,  944 
572  ,  400,  ooo 

1892  
1893 

136,  ioo,  ooo 

10,  600,  ooo 

366,  750,000 

64,  750,  ooo 

1895  
1896 

180,  243,  600 
I  i  433  .  080  ooo 

35,450,000 

IO,  OOO,  OOO 

18,  500,  ooo 
27  ,  600,  ooo 

33,  ooo,  ooo 
178,  550,  ooo 

1897   

67  ,  655  ,  ooo 

i  i  ,  700,  ooo 

6,  500,  ooo 

65,  800,  ooo 

1898  

171,  379,  480 

68,  406,  500 

21,  998,  400 

116,  198,  400 

1899 

329,  430,  ooo 

77  ,  500,  ooo 

IO,  OOO,  OOO 

606,  430,  ooo 

1900  

455.  747,  ooo 
81  378,800 

74,  591,  200 
241  ,  700,  ooo 

41,  228,  ooo 
119,  320,  ooo 

133,  350,  ooo 
183  ,  ooo,  ooo 

1902  

144,  530,  ooo 

i  18,  300,  ooo 

65  ,  772,  ooo 

388,  050,  ooo 

59,  500,  ooo 

i  10,  650,  800 

3  ,  209,  204,  490 

710,  269,  800 

80,  887  ,  ooo 

691  ,  038,  408 

130,  ioo,  ooo 

1905  

635,  947,  900 

235  ,  687,  ooo 

109,  092,  ooo 

829,  900,  ooo 

737  543  ,  800 

259,  ioo,  ooo 

250,  i  25  ,  ooo 

234,  950,  ooo 

1907  

227,  963  ,  600 

370,  270,  ooo 

97,  265  ,  ooo 

6,  603,  235,  232 

1908 

22O,  064,  9OO 

72,  900,  ooo 

6,  308,  030,  ooo 

Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 

years  1882-1908. 
GERMAN  PUBLIC  SECURITIES. 


Year.« 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.  b 

Issued 
jointly  with 
other  banks 
and  great 
banks.& 

Z882               

Marks. 

Marks. 
i  ,  500,  ooo 

Marks. 

Marks. 

1886 

1887 

!888  

9,  854,  200 

40,  ooo,  ooo 

1889 

7   ooo,  ooo 

1890  
1891 

38,  500,  ooo 

235  ,  ooo,  ooo 

1892  
1893.  . 

I  ,  OOO,  OOO 
I,  IOO,  000 

342,  500,  ooo 
25  ,  ooo,  ooo 

a  Only  those  years  are  given  during  which  issues  were  made. 
b  Including  private  banking  firms. 


934 


The     German     Great     Banks 


Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908 — Continued. 

GERMAN  PUBLIC  SECURITIES— Continued. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.b 

Issued 
jointly  with 
other  banks 
and  great 
banks.& 

1894  

Marks. 

21  ,  SOD,  OOO 

Marks. 

Marks. 

Marks. 

1895  

6,  ooo,  ooo 

3  ,  ooo,  ooo 

1896  

47  ,  ooo,  ooo 

1897  

8,  950   ooo 

1898  

6,  500,  ooo 

4,  ooo  ooo 

1899  
1900  

208,  200,  ooo 

48,  200,  000 

7,  500,  ooo 
5  ,  ooo,  ooo 

3,  228,  ooo 

10,  000,  OOO 

59,  ooo,  ooo 

1902  
1903  

I  2,  3OO,  OOO 
II,  873,  200 

42,  ooo,  ooo 
3,  500,  ooo 

1,272,  ooo 

I  ,  OOO,  OOO 

74,  ooo,  ooo 
69,  865,  ooo 

1905  
1906  
1907 

28,  ooo,  ooo 
42,  400,  ooo 

58,  937,000 
75,  500,  ooo 

3,  952,  ooo 

20,  000,  000 

60,  ooo,  ooo 
44,  ooo,  ooo 

1908  

52,  575,  ooo 

123,  654,  900 

29,  ooo,  ooo 

73,  ooo,  ooo 

FOREIGN  PUBLIC  SECURITIES. 


!883  

14,  400  ooo 

1884 

1885       .... 

1886  
1887  

16,  ooo,  ooo 
14,  400,  ooo 

i,  626,  966,  538 

1888         .  . 

45,  734  320 

X889  

21,  6OO,  OOO 

294,  132,  048 

5  i  ,  546,  397 

148  906  944 

1891      .    ... 

34,  610,  400 

1892 

ii  250  ooo 

1895 

1896 

1898  
1899 

116,  767,  080 

46,  406,  500 

51,000,  ooo 
463,  080,  ooo 

242,  250,  ooo 

3,  i2i,  539,  490 

1904 

651,  219,  408 

678,  300,  ooo 

173,  400,  ooo 

6,  481,  565,  232 

a  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


935 


National    Monetary     Commission 

Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908 — Continued. 


GERMAN  MORTGAGE  BONDS. 


Year.a 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.6 

Issued 
jointly  with 
other  banks 
and  great 
banks.  & 

1886 

Marks. 

Marks. 

Marks. 

Marks. 

1888  

i(  500,  ooo 

1892 

1894.    .  .  . 

1895  

3  .  453  .  600 

4,  450,  ooo 

1896 

1899  

5,  ooo,  ooo 

70,  ooo,  ooo 

IO,  OOO,  OOO 

1900  

45,  ooo,  ooo 

IO,  OOO,  OOO 

1901  . 

1902  
1903 

46,  ooo,  ooo 

10,  000,  000 

60,  ooo,  ooo 

1904  

25  ,  ooo,  ooo 

1906 

1907  
1908 

50,  ooo,  ooo 

10,  000,  000 

60,  ooo,  ooo 

FOREIGN  MORTGAGE  BONDS. 


1885. 

1886  

6,  375  ,  ooo 

1887 

1895  

1896  

I  IO,  5OO,  OOO 

1898 

1899  

i  i  ,  250,  ooo 

1902  

1903  

45  ,  ooo,  ooo 

1904 

1905  

56,  250,  ooo 

GERMAN 

RAILWAY  SH^ 

LRES 

1889  

2,  2OO,  OOO 

1891  
i8o<?.  . 

I,  200,  000 

3  .  OOO.  OOO 

a  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


936 


The     German     Great     Banks 


Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908 — Continued. 

GERMAN  RAILWAY  SHARES— Continued. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.6 

Issued 
jointly  with 
other  banks 
and  great 
banks.& 

1897  

Marks. 

Marks. 

Marks. 

Marks. 

1899  

1900  

600  ooo 

1902  

1904  

1906  

i  ,  700,  ooo 

1908  

4,  210,  ooo 

GERMAN  RAILWAY  BONDS. 


1884. 

1885  

2,  775,  700 

1888 

1891 

1893  

1895  

I  ,  OOO,  OOO 

2,  000,  000 

1896 

15,  ooo,  ooo 

1897  

5  ,  700,  ooo 

2,  3OO,  OOO 

1899 

IO,  OOO,  OOO 

1903  

2,  OOO,  OOO 

4,  300,  ooo 

7,  200,  ooo 

1907  

2,  OOO,  OOO 

10,000,  OOO 

FOREIGN  RAILWAY  SHARES. 


1884 

1889 

24,  ooo,  ooo 

331,  1 

80,  ooo,  ooo 

1904  

525,  ooo,  ooo 





a  Only  those  years  are  given  during  which  issues  were  made. 
Z>  Including  private  banking  firms. 


937 


National    Monetary     Commission 

Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908 — Continued. 

FOREIGN  RAILWAY  SHARES— Continued. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.6 

Issued 

jointly  with 
other  banks 
and  great 
banks.fr 

Marks. 

Marks. 

Marks. 

Marks. 

9 

FOREIGN  RAILWAY  BONDS. 


1882 

35.  782,  560 

1884 

1885 

209,  512,  800 

1886 

1887 

1888 

1889  

1890 

46,  200,  000 

169,  ooo,  ooo 

293,  080,  ooo 

13  ,000,00 

1896 

i  176,  730,  800 

GERMAN  STREET  RAILWAY  SHARES. 


1896 

I,  2OO,  OOO 

GERMAN  STREET  RAILWAY  BONDS. 


1894 

16 

ooo,  ooo 

BANK  SHARES. 


1888 

20,  ooo,  400 

1889 

1891 

300,  ooo 

i,  500,  ooo 

1892 

3  ooo  ooo 

1804.  . 

5,  .s  oo,  ooo 

36,  500,  ooo 

a  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


938 


The     German     Great     Banks 

Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908 — Continued. 

BANK  SHARES— Continued. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.6 

Issued 
jointly  with 
other  banks 
and  great 
banks.6 

1895  

Marks. 
5,  ooo,  ooo 

Marks. 

2.  OOO,  OOO 

Marks. 

Marks. 

1896  

93,  249,  200 

1897 

4   ,250,00 

1898  

24,  201  ,  600 

25,500,00 

1899  

17,  880,  ooo 

1900  

18,  ooo,  ooo 

1901  

1902  

9.  252  ,  ooo 

1903  

18.  400,  ooo 

1904  

44,  750,  800 

1906. 

71,316   ooo 

34,  ooo  ooo 

1907  

23  ,  999,  600 

1908 

BANK  DEBENTURES. 


1891  

INDUSTRIAL  SHARES. 


1883. 

1884  

i  ,  980,  ooo 

1885 

1887  

1888 

1889. 

1890  

3  ,  316,  800 

1  7,  400,  ooo 

1891 

1892.  .  . 

i  ,  600,  ooo 

1893 

1894 

15  ,  500,  ooo 

1895  

1896 

12,  150,  000 

i  ,  500,  ooo 
4,  700,  ooo 

2,  OOO,  OOO 

3  ,  ooo,  ooo 

1897  

8,  705  ,  ooo 

10,  500,  ooo 

1898 

7  810  800 

4,  ooo,  ooo 

18,  998,  400 

37,  198,  400 

1899  

34,  600,  ooo 

91,  850,000 

a  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


939 


National    Monetary     Commission 


Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908 — Continued. 

INDUSTRIAL  SHARES— Continued. 


Year.a 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.  *> 

Issued 
jointly  with 
other  banks 
and  great 
banks.& 

igOO        

Marks. 
7,  385  ,  ooo 

Marks. 
6,  700,  ooo 

Marks. 
5,  ooo,  ooo 

Marks. 
34,  750,  ooo 

38,  068,  800 

18,  200,  ooo 

750,  ooo 

5  ,  ooo,  ooo 

IQO2                        

7,  600,  ooo 

4,  500,000 

29,050,000 

1903  

10,  100,  ooo 

10,  000,000 

I,  000,  000 

5,  000,000 

27,5  19,  ooo 

2,  4SO,  OOO 

30,  219,  ooo 

19,  ooo,  ooo 

1905  

18,  423,  500 

21  ,  235  ,  OOO 

59,  250,000 
36,  800,  ooo 

5,  ooo,  ooo 
13  ,  225  ,  ooo 

68,  100,000 
162,  300,  ooo 

IQO?  
1908  

10,  000,  000 

74,  400,  ooo 

44,  ooo,  ooo 
34,  700,  ooo 

15,  ioo,  ooo 
3,  900,  ooo 

42,  670,  ooo 
66,  780,  ooo 

INDUSTRIAL  BONDS. 


t883      

15,  ooo,  ooo 

1884  

5,  ooo,  ooo 

6,  600,  ooo 

!886        

I  ,  OOO,  OOO 

1888 

1889  
1890     

I,  000,  000 
I  ,  2OO,  OOO 

1891 

3  ,  ooo,  ooo 

I  2,  500  OOO 

1892      

i  ,  500,  ooo 

5  ,  ooo,  ooo 

1803 

1894 

3,  ooo,  ooo 

20,  ooo  ooo 

1895  

3  ,  ooo,  ooo 

15  ,  ooo,  ooo 

1896 

1897 

6,  500,  ooo 

1898  

8,  ooo,  ooo 

5  ,  ooo,  ooo 

20,  ooo,  ooo 

1899 

24  ooo  ooo 

1900.    

6,  ooo,  ooo 

23  ,  ooo,  ooo 

29,  ooo,  ooo 

1901  

16,  ooo,  ooo 

55  ,  ooo,  ooo 

1902      .  . 

12,  528,  OOO 

i  7,  ioo,  ooo 

1903  
1904 

35,  125,  ooo 

I,  000,  000 

8,  650,  800 
9,  600,  ooo 

12,  800,  000 

8,  ooo  ooo 

1905  
1906  

38,  650,  ooo 
i  i  ,  500,  ooo 

13,  ooo,  ooo 
5  7,  800,  ooo 

8,  740,  ooo 

7,  500,  ooo 

15,  200,  OOO 

1907  
1908  

II,  000,  000 
4O,  2OO,  OOO 

46,  470,  ooo 
27,  500,  ooo 

20,  000,  000 

41,  500,  ooo 
168,  250,  ooo 

a  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


940 


The    German    Great    Banks 


mSCONTO-CESELLSCHAFT. 

Total  -value  of  securities  issued  at  the  Berlin  Stock  Exchange  during  the  years 

1882-1908. 


Year.a 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.& 

Issued 
jointly  with 
other  banks 
and  great 
banks.& 

1882   .   . 

Marks. 

Marks. 

Marks. 

Marks. 

1883  

42,  55O,OOO 

.      2O,OOO,OOO 

5,7  2,5 

1884  

I3?OOO,OOO 

1885  . 

1886  
1887 

46,328,OOO 

16,000,000 

65,250,000 

48,645,000 

1888. 

1889  
1890 

65,205,400 

148,392,048 

x>  3i5>  738»  680 

924,  869,  360 

1891  .   . 

1892  

9?  500,000 

8,  100,000 

66,987,  5OO 

1893 

1894  . 

1895  
1896 

104,807,000 

7,500,000 

182,730,000 

198,219,000 

1897 

315,960,000 

1898  
1899  

67,  680,  900 
185,  724,000 

27,251,600 
41,  100,000 

632,690,784 
357,  200,000 

417,813,280 
67,  500,000 

1900 

122,610,000 

23,031,  200 

204,  200,  ooo 

240,  450,  ooo 

1901  

49,464,600 

179,000,000 

89,400,000 
561,  600,000 

516,492,000 

1,  505,  349,  500 

1903 

213,  615,  188 

32,  213,000 

159,850,000 

3,  214,824,  590 

1904  

169,000,800 

64,937,000 
231,337,000 

21,  5OO,OOO 
487,  77I>33O 

585,540,570 
I,  141,  250,000 

1906                                        

23,322,340 

172,  500,000 

8,000,000 

218,559,000 

1907  
1908 

53,499,600 

333,796,000 
165,000,000 

92,550,000 

61,  700,000 

6,575,015,232 
531,820,000 

0  Only  those  years  are  given  during  which  issues  were  made. 
b  Including  private  banking  firms. 


941 


National    Monetary     Commission 


Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908. 

GERMAN  PUBLIC  SECURITIES. 


Year.a 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.& 

Issued 
jointly  with 
other  banks 
and  great 
banks.fr 

1882 

Marks. 

Marks. 

Marks. 

Marks. 

x883  

15  ,  ooo,  ooo 

1884  

2,  OOO,  OOO 

1885 

x886  

5,  ooo,  ooo 

1888 

1890  

ii  ,  500,  ooo 

235,  ooo,  ooo 

1891 

3   ooo,  ooo 

458,  ooo   ooo 

1892                      

7   500  ooo 

342,  500,  ooo 

1893  

I  2  ,  OOO,  OOO 

50,  ooo,  ooo 

1894 

32,  ooo,  ooo 

IO,  OOO,  OOO 

1895  
1896 

36,357,000 

3,  500,  ooo 

6,  230,  ooo 
i  15   395  (  700 

IO,  OOO,  OOO 

3   ooo,  ooo 

1897         

18   552   500 

2  ,  7SO,  OOO 

40,  ooo,  ooo 

1898 

1899 

7   500,  ooo 

I  2  ,  OOO,  OOO 

1900  

8,  ooo,  ooo 

7,  500,  ooo 

1902  

42,  ooo,  ooo 

138,  ooo,  ooo 

408,  317,  ooo 

1905  

15,  488,  ooo 

23  ,  937  ,  ooc 

474,  ooo,  ooo 

1906 

26   ooo   ooo 

1907  
1908 

127,  296,  ooo 

25,  ooo,  ooo 

20,  000,  000 

FOREIGN  PUBLIC  SECURITIES. 


1882  
1883  

118,  560,  ooo 
4,  050,  ooo 

!884  

i  2,  800,  ooo 

1886  
1887  
1888 

7,  128,  ooo 
18,  009,  250 

54,  ooo,  ooo 
238,  500,  ooo 

34  418  825 

1889       .  . 

148  392  048 

i  081  561  680 

76,  500,  ooo 

1890  
1891  . 

1,425,887,664 
206  400,  ooo 

1892.  . 

36,  187,  loo 

«  Only  those  years  are  gi  ven  during  which  issues  were  made, 
fr  Including  private  banking  firms. 


942 


The     German     Great     Banks 

Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908 — Continued. 

FOREIGN  PUBLIC  SECURITIES— Continued. 


Year.a 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.  & 

Issued 
jointly  with 
other  banks 
and  great 
banks." 

1893  

Marks. 

Marks. 

Marks. 

Marks. 

1894  

1895  

1896  

1897  

1898  

,900,000 



1899  

1900  

1901  

1,200,00 

1902  

61   600 

212,500,000 

1903  

1  8  0'°°° 

1904  

. 

1905  .     . 

1907  

1908  

553 

GERMAN  MORTGAGE  BONDS. 


1887 

1891  

1892  

1893  

JO,  OOO  OOO 

1894  

1895  

20,  ooo,  ooo 

1896 

1897  

678  139  500 

1898 

1901  

22,  4OO,  OOO 



1903  

150,  ooo,  ooo 

IO,  OOO,  OOO 

1908 

a  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


943 


National    Monetary     Commission 


Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908 — Continued. 

FOREIGN  MORTGAGE  BONDS. 


Year.i 

Issued 

exclusively 
by  the  bank. 

Issued 

jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.  & 

Issued 
jointly  with 
other  banks 
and  great 
banks.* 

1886 

Marks. 

Marks. 

Marks. 
ii    250  ooo 

Marks. 

!887             

20,  ooo,  ooo 

ii,  377,  090 

r888  

7,  800,  300 

!889            

26,  775   ooo 

1891  

3  ,  400,  ooo 

1892 

180^ 

1896 

1897  

51  ,  ooo,  ooo 

1898 

1900  

13  ,  931  ,  200 

1904  

34,  ooo,  ooo 

GERMAN  RAILWAY  SHARES. 


1883  

i  ,  500  ooo 

1890  

i  ,  500,  ooo 

1891  

1894  

i  ,  938,  ooo 

1896. 

1897  

1898 

1899  

1900  
1901  

6,  ooo,  ooo 



9,  200,  ooo 

1904  

1906  .  .  . 

1908  

GERMAN  RAILWAY  BONDS. 


1888 

1894  

I  ,  2OO,  OOO 

!896  

6,  ooo,  ooo 

1897  

1898... 

IO.  OOO.  OOO 

«  Only  those  years  are  given  during  which  issues  were  made. 
b  Including  private  banking  firms. 


944 


The     German     Great     Banks 


Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908 — Continued. 

GERMAN   RAILWAY  BONDS— Continued. 


Year.o 


Issued 

exclusively 

by  the  bank. 


Issued 
jointly  with 
other  great 

banks. 


Issued 
jointly  with 
other  banks.6 


Issued 

jointly  with 

other  banks 

and  great 

banks.  & 


Marks.                  Marks.                   Marks.  Marks. 

1899 25,000,000 

1900 42,000,000     7,000,000 

I9oi 1,560,000     9,500,000 

I9°S 5, ooo, ooo 

4, 500, ooo 
1907 500, ooo 

FOREIGN  RAILWAY  SHARES. 

1885 37, 120, ooo 

1888 4,800,000  6,913,890 

1891 36, ooo, ooo  8, ooo,  ooo 

1892 5, 600, ooo 

1897 243,  210,  000 

1898 273,013, 280 

1899 126,000,000 

190° 27, ooo, ooo 

1901 • 214,  992,  ooo 

1903 56, 522,688 

1904 42,000,000 

1905 2, loo, ooo, ooo  105, ooo, ooo 

FOREIGN  RAILWAY  BONDS. 

1882 6,500,000  85,782,560 

1883 16, ooo, ooo     20, ooo, ooo  

1884 39, 437,  200 

1885 160,445,260 75,380,800 

1886 15,200,000     16,000,000  48,645,000 

1887 190, ooo, ooo  67 , 286, 500 

1888 92, ooo, ooo  

1889 22,450,000  207,402,000  848,369,360 

1890 46, 515, 600  III, 288, 750 

1891 21,374,000 

1892 52, 800, ooo 

1893 16, ooo, ooo 

1894 1 25,957,000  160,000,000 

o  Only  those  years  are  given  during  which  issues  were  made. 
b  Including  private  banking  firms. 


90311"— II- 


945 


National    Monetary     Commission 

Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908 — Continued. 

FOREIGN  RAILWAY  BONDS— Continued. 


rgqc 

Marks. 

Marks. 

Marks. 

Marks. 
158,  219,  ooo 
56,  736,  ooo 
I.  687,  500 

1896                       .   . 

1906  

GERMAN  STREET  RAILWAY  BONDS. 

l8Q4 

16,  ooo,  ooo 
7,  500,  ooo 

!896  

BANK  SHARES. 

1887  

1889  

16,  500,  ooo 

1891 

15,  ooo,  ooo 

1892  

1894  

4,  500,  ooo 

1895  

41  ,  500,  ooo 

1896  

14,  500,  ooo 

10,  500,  ooo 

28,  250,  ooo 
18,  ooo,  ooo 
8,  ooo,  ooo 
17  ,  ooo,  ooo 

1897  

6,  ooo,  ooo 

1898  
1899  

24,  500,  ooo 
4,  ooo,  ooo 

9,000,  ooo 

1900  

27,  510,  ooo 

24,  ooo,  ooo 

1902  

36,  500,  ooo 

1903  

7,  713,000 
6,  ooo,  ooo 

IO,  OOO,  OOO 

9,  ooo,  ooo 
16,  ooo,  ooo 
8,000,  ooo 
33,  600,  ooo 

1904 

30,000,  800 
30,  834,  ooo 
i,  008,  ooo 
21,  999,  600 

12,  50O,  OOO 

16,  ooo,  ooo 
23,  250,  ooo 
20,  ooo,  ooo 

1905  

1907  
1908  

INDUSTRIAL  SHARES. 

1882  

1888  

1889  

1890.  .  . 

2,  IOO,  OOO 

12.  000.  000 

3  .  d<O.  OOQ 

o  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


946 


The     German     Great    Banks 

Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908 — Continued. 


INDUSTRIAL  SHAR  ES— Continued. 


Year.a 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.  6 

Issued 
jointly  with 
other  banks 
and  great 
banks.  & 

1893  

Marks. 

Marks. 

Marks. 

Marks. 

1894  

1895  

4,  950,  ooo 

i  ,  750,  ooo 

5,  ooo,  ooo 

1896 

1897  

15,  ooo,  ooo 

xSgS  

12,  180,  900 

II.  751    600 

800  oo 

1899  

30,  724,  ooo 

28,  600,  ooo 

4,  768,  800 

52,750.00 

1902  

62,  ooo,  ooo 

27,  ooo,  ooo 

1905  

14,  900,  ooo 

50,  ooo,  ooo 

6,  200,  ooo 

4.  500,  ooo 

54,  ooo,  ooo 

1908  

12,  9OO,  OOO 

21  ,  OOO,  OOO 

22,  OOO,  OOO 

INDUSTRIAL  BONDS. 


1882 

1883  

1884 

1886  

1887  

1888 

1889.  ..    ... 

3,  815  ,  ooo 

34,  ooo,  ooo 

1894  ...    ... 

' 

15,  ooo,  ooo 

1895  

1896 

2,  OOO,  OOO 

2,  5OO,  OOO 

3,  500,000 

10,000,  ooo 
7,  500,  ooo 

1807 

1898 

.  .  .  .40,  ooo,  ooo 

1900  

6,  ooo,  ooo 

IO,  OOO,  OOO 

35,000,  ooo 

IO,  OOO,  OOO 

45,  500,  ooo 

30,  ooo,  ooo 

IQO3.  . 

12,000,  ooo 

a  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


947 


National    Monetary     Commissio 


n 


Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908 — Continued. 


INDUSTRIAL  BONDS— Continued. 


Year.a 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.  & 

Issued 
jointly  with 
other  banks 
and  great 
banks.  & 

Marks. 

Marks. 

Marks. 

Marks. 

42,  400,  ooo 

1906  

i,  800,  ooo 

53,  ooo,  ooo 

27,  397,  500 

1908  

21,  OOO,  OOO 

18,  ooo,  ooo 

181,  320,  ooo 

r»RESI»NER  BANK. 

Total  value  of  securities  issued  at  the  Berlin  Stock  Exchange  during  the  years 

1882-1908. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.6 

Issued 
jointly  with 
other  banks 
and  great 
banks.  & 

1882  

Marks. 
12,  920,  ooo 
25,  ooo,  200 

Marks. 

Marks. 

Marks. 

1883  

1884  

1885  

7,  ooo,  ooo 

1886 

320,  ooo 
14,  ooo,  ooo 
36,  650,  ooo 

82,  138,  200 

6,  100,  060 



31,  966,  800 

1887  

1888  

213,  740,  ooo 

4,  ooo,  ooo 
15,500,000 
29,499,900 
41,  ooo,  ooo 
66,  500,000 
6,  ooo,  ooo 
106,  ooo,  ooo 
38,  900,  ooo 
131,  ooo,  ooo 
132,  ooo,  ooo 
605,  080,  ooo 
30,  ooo,  ooo 
24,491,  250 
242,  250,  ooo 

issues  were  mac 

158,  340,  ooo 
170,  520,  ooo 
256,  150,  ooo 
628,  470,  ooo 
372,  ooo,  ooo 
92,  750,  ooo 
100,  758,  ooo 
52,  640,  ooo 

119,  500,  000 

23,  75O,  ooo 

69,  200,  000 

44,  700,  ooo 
142  ,  900,  ooo 
172,  ooo,  ooo 
480,  ooo,  ooo 

e. 

1889   . 

1890  

1891 

3,  900,  ooo 
6,  ooo,  ooo 
34,  ooo,  ooo 
3,000,000 
16,  250,  ooo 
30,362,  500 

14,  ooi  ,  600 
40,  100,000 

62,  2OO,  OOO 

143,000,  ooo 
13,  ooo,  ooo 
en  during  which 

1892  

10,  140,  ooo 

l8Ql 

1894.  . 

13,  825,  ooo 

155.323,000 

100,  648,  ooo 
84,350,  ooo 
3  i,  450,  ooo 
90,  650,  ooo 

37,734,400 

20,  839,  OOO 

50,  ooo,  ooo 
ose  years  are  giv 

1895  
1896 

1897  
1898 

1899. 

1900  
I9OI 

J9O2  

o  Only  th 

&  Including  private  banking  firms. 


948 


The     German     Great     Banks 


Total  -value  of  securities  issued  at  the  Berlin  Stock  Exchange  during  the  years 
1882-1908— Continued . 


Year,  a 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.  & 

Issued 
jointly  with 
other  banks 
and  great 
banks.  & 

1903 

Marks. 

Marks. 

Marks. 

Marks. 

1904  

100,  393  ,  ooo 

225,  229  ooo 

,00,00 

1907  

47,  550,  ooo 

357>  99O.  ooo 

1908  

209,  734,  400 

278,  154,  900 

Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908. 

GERMAN  PUBLIC  SECURITIES. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.  & 

Issued 
jointly  with 
other  banks 
and  great 
banks.& 

1883 

Marks. 

Marks. 

Marks. 

Marks. 

1890                         .  .  . 

12,  OOO,  OOO 

235,000,  ooo 

1891 

508,  ooo,  ooo 

1892 

12,  OOO,  OOO 

340,000,  ooo 

66  500,  ooo 

25  ,  ooo,  ooo 

1894        

I,  OOO,  OOO 

10,  OOO,  000 

1895  
1896 

II,  IOO,  000 

106,  ooo,  ooo 
4,  ooo,  ooo 

48,000,000 

180? 

20,  ooo,  ooo 

29,000,000 

1898  
1899  

17,  ooo,  ooo 
4,  000,000 

5,  ooo,  ooo 

75,  ooo,  ooo 

112,  000,  000 

15,  700,  ooo 
50,000,000 

1901  

15,  ooo,  ooo 

118,  ooo,  ooo 

9,  800,  ooo 

17,000,  ooo 

416,000,000 

1903  

29,  142,  ioo 

35,000,000 

54,904,900 

460,317,000 

5  ,  652,  400 

67,000,  ooo 

3,  200,  000 

60,000,  ooo 

i  18,  154,  900 

65,000,000 

a  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


949 


National    Monetary     Commission 


Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908 — Continued. 

FOREIGN  PUBLIC  SECURITIES. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.6 

Issued 
jointly  with 
other  banks 
and  great 
banks.*> 

1888  

Marks. 
10,  400,  ooo 

Marks. 

Marks. 

Marks. 

1889 

1891  

1892  

1894 

1895  

117,  748,  ooo 

X896  

1898  

1899  

1901  

13,  691,  250 

1902  . 

1905  

77,  520,  ooo 

1907  
1908  

199,834,400 

142,  800,  ooo 

6,481,565,  232 

GERMAN  MORTGAGE  BONDS. 


1885  

7,  ooo,  ooo 

1889  

15,  718,  200 

1 

1891  

'  •  '1  

1892  

,000 

1894  

1895  

1896  

30,  ooo,  ooo 

1897  

1899  

1900  

1901  

15  ,  ooo,  ooo 

1902  

1903  

1904  

30,  ooo  ooo 

I2O,  OOO,  OOO 

1905  

1906  

15,  ooo  ooo 

' 

1907  

1908  

50.000,00 

»Only  those  years  are  given  during  which  issues  were  made. 
b  Including  private  banking  firms. 


95° 


Th 


German     Great     Banks 


Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908 — Continued. 

FOREIGN  MORTGAGE  BONDS. 


Year.o 


Issued 

exclusively 

by  the  bank. 


Issued 
jointly  with 
other  great 

banks. 


Issued 
jointly  with 
other  banks.  & 


Issued 

jointly  with 

other  banks 

and  great 

banks.b 


Marks.  Marks.  Marks.  Marks. 

1895 6, 075, ooo 

1896 9,000,000     17,000,000 

1905 67, 500, ooo 

GERMAN  RAILWAY  SHARES. 

1894 i , 200, ooo 

1896 i, 800, ooo 

1906 40, ooo, ooo 

GERMAN  RAILWAY  BONDS. 

1899 25,000,000 

1900 4, ooo, ooo 

1901 1,839,000 

1905 ii,  900,  ooo 

1906 4, 500,  ooo 

1908 4, ooo, ooo 

FOREIGN  RAILWAY  SHARES. 

l882 12,  92O,  OOO 

1890 2,740,060 

1900 48, ooo,  ooo 

1901 80,  ooo,  ooo 

1904 25, 500, ooo 

1905 25, ooo, ooo     15, 300, ooo 

FOREIGN  RAILWAY  BONDS. 

1883 10,  000,  200 

1884 26,413,200 

20, 400, OOO 

1891 29,  499. 900  16, 320, ooo 

1892..  15,000,000  12,000,000 

1893 64, ooo, ooo 

a  Only  those  years  are  given  during  which  issues  were  made. 

&  Including  private  banking  firms. 


951 


National    Monetary     Commission 


Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908 — Continued. 

FOREIGN  RAILWAY  BONDS— Continued. 


Year,  a 


Issued 

exclusively 
by  the  bank. 


Issued 
jointly  with 
other  great 

banks. 


Issued 
jointly  with 
other  banks. b 


Issued 

jointly  with 

other  banks 

and  great 

banks.  *> 


Marks.  Marks.  Marks.  Marks. 

1894 32, 640, ooo 

1895 32, 640, ooo 

1896 48, 948, ooo 

1906 I, 687, 500 

• 

GERMAN  STREET-RAILWAY  SHARES. 

1894 4, 275,000 

1895 3,000,000 

1896 8,650,000 

1897 i, 350, ooo  i, 250, ooo 

1898 6, ooo,  ooo 

1899 26,000,000 

1900 I,  200,  000 

1902 23,000,000 

1904 14, 297, ooo 

1906 500, ooo 

GERMAN  STREET-RAILWAY  BONDS. 

1894 16, ooo, ooo 

1896 7, 500, ooo 

1897 2,  500,  000 

1900 3 , ooo, ooo 

1901 5, 500, ooo 

BANK  SHARES. 

1883 12,  OOO,  OOO 

iSS? 12,000,000 

1889 16,800,000       68,000,000 

1891 300, ooo  50, 400, ooo 

1892 10,000,000 

1894 32, ooo, ooo 

1895 15,000,000 


a  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


952 


The     German     Great     Banks 

Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908— Continued. 


BANK  SHARES — Continued. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.  & 

Issued 
jointly  with 
other  banks 
and  great 
banks.  6 

1896  

Marks. 

Marks. 

Marks. 

Marks. 

1897  

78,  ooo,  ooo 

,000,00 

1898  

9,  600,  ooo 

1899  

29,  600,  ooo 

,000,00 

1901  

1903  

7,  713  ,  ooo 

1904  

41  ,  ooo,  ooo 

1905  . 

i    ,500,00 

1906  

io,  500,  ooo 

22  ,  IOO,  OOO 

1907  

20,  600,  ooo 

25,  500,  ooo 

INDUSTRIAL  SHARES. 


1886  

320,  ooo 

31  966  800 

1887  

2  ,  OOO,  OOO 

1888 

1889  
1890  

1891 

io,  500,  ooo 
3,  360,  ooo 

4,000,000 
3,  500,  ooo 

750,  ooo 

1892 

140,  ooo 

1893  . 

3,  750,  ooo 

1894  

1895 

600,  ooo 

3,  ooo,  ooo 
4  750  ooo 

6,  ooo,  ooo 

6,  ooo,  ooo 

1896 

2  8OO  OOO 

8,  800,  ooo 

15  ,  ooo,  ooo 

36,  200,  ooo 

1897 

1898  

1800 

4,  850,  ooo 

2,001,600 

21,  200,  000 

29,  ooo,  ooo 

1900  .          ... 

20,  734,  400 

9,  200,  ooo 

53,  700,  ooo 

1902 

28,  ooo,  ooo 

1903 

5  700,  ooo 

i,  260,  ooo 

18,  500,  ooo 

1904         .  . 

20,  193  ,  ooo 

io,  950,  ooo 

II,  000,  000 

28  195  ooo 

60,  750,  ooo 

49,  800,  ooo 

1906 

4,  700,  ooo 

79,  315,  200 

5,  ooo,  ooo 

91,  750,  750 

41  ,  250,  ooo 

1908  

2  ,  9OO,  OOO 

23  ,  ooo,  ooo 

31,  800,  ooo 

a  Only  those  years  are  given  during  which  issues  were  made, 
b  Including  private  banking  firms. 


953 


National     Mo  n  etary     Commit  s  i  o  n 

Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908 — Continued. 


INDUSTRIAL  BONDS. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.b 

Issued 
joitly  with 
other  banks 
and  great 
banks.  * 

1888  

Marks. 

Marks. 

Marks. 

Marks. 

x889  

I  2    6OO    OOO 

1892  

6  ooo  ooo 

1893  

34,  ooo,  ooo 

1895  

1896  

i,  250,  ooo 

7,  500,  ooo 

1897  

2,5OO,OOO 

1898  

1900.  .  .  . 

40,000.00 

1901  

4  ooo  ooo 

35.ooo.oo 

45.500,00 

1903  

3    . 

1904  

3,  200  ooo 

1905 

* 

1906  
1907  
1908  

82,  500,000 
33.970,000 
43  ,  ooo  ,  ooo 

17,  147.500 

*7.500,  OOO 

171.  320,  ooo 

A.  SCHAAFFHAUSEN'SCHR  BANKVEREIN. 

Total  value  of  securities  issued  at  the  Berlin  Stock  Exchange  during  the  years 

1882-1908. 


Year.a 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.ft 

Issued 
jointly  with 
other  banks 
and  great 
banks.b 

1890  

Marks. 

Marks. 

Afar**. 

Mmrkt, 

1891  

1892  
1893  

18,  ooo,  ooo 
19.  980,  ooo 

3,000.  ooo 

346,000,  ooo 

1894  
1895.  .  .  . 

36,  189,000 

12,  OOO,  OOO 

no,  500,000 

1896  

8  8°° 

15,500,00 

1897.  . 

i      8»o  ooo 

5.050.00 

1898  

17.     ,0,00 

1899 

5,000,000 

23.000.00 

1900.  .  . 

45.  700.  000 

18.  600.  ooo 

I  2.  5OO.  OOO 

I  7O.  4CO.  OOO 

a  Only  those  years  are  given  during  which  issues  were  made. 
6  Including  private  banking  firms. 


954 


T  h 


G  e  r  m  a  n     Great     Banks 


Total  value  of  securities  issued  at  the  Berlin  Stock  Exchange  during  the  yean 
1882-1908—  Continued. 


Year.* 

Ittued 
exclusively 
by  the  bank. 

totted 
jointly  with 

oth»-r  srr^t 
bank*. 

Issued 

J55M. 

jointTwuh 

'-•/.-r  bttfe 

«CP 

1901  

Marks. 

Jforts, 

Mark*. 

Afar*/. 

1902.  .... 

21,000,000 

101,500,000 

1903  

8  600  ooo 

20,000,000 

76,000.000 

1904, 

30,000,000 

37.000,000 

1905  

*3»>  179,000 

60,000,000 

68,797,000 

1906  

290,  297,  770 

30,000,000 

749,600,000 

1907  ,  . 

468,4  600 

'40,359,000 

1908  

31.520,000 

105,500,000 

216,870,000 

securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 

years  1882-1908. 
GERMAN  PUBLIC  SECURITIES. 


Year.* 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 

orh'rr  er^t 
banks. 

Issued 
jointly  with 

other  banks.* 

Issued 
jointly  with 
other  bank* 

•sse? 

1891  

Mark,. 

Marks. 

Marks. 

Afw*». 

1892  

1894  

2,500,000 

3,000,00 

1895  

1896  

2,500,00 

1897  

1898  

20,  000.  000 

1899  

1900  

15.700.000 

1901  

1902  

23,  000,000 

1903  

1904,  . 

1905  

1906  

1907.  . 

1908  

| 

FOREIGN  PUBLIC  SECURITIES. 


77,625,170  I 


678,300,000 


;  Only  those  years  are  given  during  which 


955 


National    Monetary     Commission 

Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908 — Continued. 


GERMAN  MORTGAGE  BONDS. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.6 

Issued 
jointly  with 
other  banks 
and  great 
banks.6 

1894  

Marks. 
20,  ooo,  ooo 

Marks. 

Marks. 

Marks. 

1895  

80,  ooo,  ooo 

1897 

20,  ooo,  ooo 

1898  

60,  ooo,  ooo 

30  ooo  ooo 

I9O4  

I  IO,  OOO,  OOO 

1907  
1908  

45,  ooo,  ooo 
60,  ooo,  ooo 

50,  ooo,  ooo 

1907  

1908  

45,  ooo,  ooo 
60,  ooo,  ooo 

50,  ooo,  ooo 

GERMAN  RAILWAY  SHARES. 

^98             

5,  ooo,  ooo 

5,  ooo,  ooo 
5,  ooo,  ooo 

9,  200,  OOO 

14,  297,  ooo 
4,  024,  ooo 

II,  OOO,  OOO 

1899 

1904  

1908  

FOREIGN  RAILWAY  SHARES. 

60,  ooo,  ooo 

1904  

15,  300,  ooo 

1906  

I,  687,  500 

GERMAN  RAILWAY  BONDS. 

1898  

10,  000,  OOO 

13,  ooo,  ooo 
9,  500,  ooo 

II  ,  9OO,  OOO 

4,  500,  ooo 

1900 

1901  

1905 

1906  

a  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


956 


The     German     Great    B 


a  n 


Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908— Continued. 

FOREIGN  RAILWAY  BONDS. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.& 

Issued 
jointly  with 
other  banks 
and  great 
banks.6 

1894  

Marks. 

Marks. 

Marks. 

Marks. 

BANK   SHARES. 


1892  
1894  

12,  OOO,  OOO 

4,  ooo,  ooo 

4,  500,  ooo 

1895  

12,  OOO,  OOO 

4,  ooo,  ooo 
30,  ooo,  ooo 
S,  500,  ooo 
34,  800,  ooo 
600,  ooo 
25,  ooo,  ooo 
8,  750,  ooo 
35,  200,  ooo 

7,  500,  ooo 

1896  

1897  

2,  2SO,  000 

8,  ooo,  ooo 

6,  ooo,  ooo 
9,  ooo,  ooo 

1898 

1899  

1901  

6,  ooo,  ooo 

24,  ooo,  ooo 

12,  500,  OOO 

16,  ooo,  ooo 
16,  250,  ooo 

20,  OOO,  000 

1904  

1905  

6,  500,  ooo 

22,  100,  000 

1907  

INDUSTRIAL   SHARES. 


1890  

1892 

,   00,00 

1893  

16,  980,  ooo 

1894  
1895  

3,  689,  ooo 
8,  500,  ooo 

3,  ooo,  ooo 

12,  OOO,  OOO 

6,  ooo,  ooo 

1896  

33,  620,  ooo 

4,  800,  ooo 

750,  ooo 

1897  

74,  058,  600 

370,  ooo 

1898 

1899  

1900  

35,  150,000 
15,  700,  ooo 

8,  280,  ooo 
18,  600,  ooo 
15  200  ooo 

2,  500,  000 

9,  ooo,  ooo 
43,  250,  250 

1903  

1904  

3,  600,  ooo 

12,  784,  OOO 

II,  400,  000 

25  ,  400,  ooo 



25,  ooo,  ooo 

21  ,  OOO,  OOO 

1906  
1907  

1908 

25,  300,  ooo 
4,684,600 

104,  415,  200 

51,  ooo,  ooo 

22,  7OO,  OOO 

1,000,  ooo 
i,  520,  ooo 

89,  500,  ooo 
20,  500,  ooo 
34,  550,  ooo 

o  Only  those  years  are  given  during  which  issues  were  made, 
b  Including  private  banking  firms. 


957 


National    Monetary     Commission 

Value  of  securities  issued  and  listed  at  the  Berlin  Stock  Exchange  during  the 
years  1882-1908 — Continued. 


INDUSTRIAL   BONDS. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.b 

Issued 
jointly  with 
other  banks 
and  great 
banks.& 

1892  

Marks. 
4,  500,  ooo 

Marks. 

Marks. 

Marks. 

1893 

1894  

6,  ooo,  ooo 

iSo"? 

!896        

3,  250,  ooo 

1897  

5,  ooo,  ooo 

1898 

1899  

12,  OOO,  OOO 

1902  

3  ,  ooo,  ooo 

1904  

1906  
1907  



57,300,  ooo 



24,397,500 

1908 

a  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


958 


The     German     Great    B 


a  n 


APPENDIX  VI. 

TOTAL  VALUE  OF  SECURITIES  ISSUED  AT  ALL  GERMAN  STOCK 
EXCHANGES  BY  THE  GREAT  BANKS  DURING  THE  YEARS 
1897-1908. 

BANK  FttR  HANDEL  UNT>   INDUSTRIE. 

Total  value  of  securities  issued  at  all  German  stock  exchanges  during  the 
years  1897-1908. 

[To  page  396.] 


Year.* 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.b 

Issued 
jointly  with 
other  banks 
and  great 
banks.& 

1897  

Marks. 
421  ,  644,  ooo 

Marks. 

Marks. 

Marks. 

1898 

1899            

1900  

31  ,  600,  ooo 

,700,00 

187    815    700 

1903    

421  ,  374,  700 

II      9O6     8OO 

1,0   9. 

1904  

54,  509,  ooo 

44,  ooo,  ooo 

203   250,  ooo 

1907  

14,  550,  ooo 

190,  ooo,  ooo 

9,  750  ooo 

1908 

Value  of  newly  issued  securities  listed  at  all  German  stock  exchanges  during 
the  years  1897-1908. 

GERMAN    PUBLIC   SECURITIES. 


Year.* 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.6 

Issued 
jointly  with 
other  banks 
and  great 
banks.* 

1897  
1898 

Marks. 
287,  500,  ooo 

Marks. 

Marks. 
24,  703,000 

Marks. 

20,000,  000 

6,  ooo,  ooo 

1899             

26,  500,  ooo 

7,  500,  ooo 

4,  939,  SOD 

27,  700,  ooo 

1900  

2,  3OO,  OOO 

3,  ooo,  ooo 

3.639,  S°o 

57,  500,  ooo 

14,  500,  ooo 

i,  079,  ooo 

28,  ooo,  ooo 

1902          

i,  050,  ooo 

6,  ooo,  ooo 

8,  500,  ooo 

17,  ooo,  ooo 

1903  

13,  ooo,  ooo 

10,656,  800 

26,960,  ioo 

Only  those  years  are  given  during-  which  issues  were  made. 
Including  private  banking  firms. 


959 


National     Monetary     Commission 


Value  of  newly  issued  securities  listed  at  all  German  stock  exchanges  during 
the  years  i8gj-igo8 — Continued. 

GERMAN  PUBLIC  SECURITIES— Continued. 


Year.a 


Issued 

exclusively 

by  the  bank. 


Issued 

jointly  with 

other  great 

banks. 


-     Issued 
jointly  with 
other  banks.6 


Issued 

jointly  with 

other  banks 

and  great 

banks.6 


Marks.  Marks.  Marks.  Marks. 

1904 16,000,000  35,000,000  405,317,000 

1905 12,500,000  12,000,000     387,000,000 

1906 2,000,000  50,000,000  9,017,200  44,000,000 

1907 5,000,000  42,500,000  2,250,000  438,500,000 

1908 6,000,000  67,000,000     1,133,325,000 

FOREIGN  PUBLIC  SECURITIES. 
1898 46,406,500     377,400,000 

I90O 102  ,  000,  000 

I9OI 226,  191,  250 

1902 i, 166, 599, 500 

1903 280,000,000     3,383,148,974 

1904 90, 426, 570 

1905 678, 300, ooo 

1906 80,000,000     48,480,000  28,350,000 

1907 6, 481, 565,  232 

1908 191, 760, ooo 

GERMAN  MORTGAGE  BONDS. 

1897 115,000,000 

1898 85,300,000 

1900 20,000,000  75,000,000 

1902 66, 040,  700           30, ooo, ooo 

1903 124,324,700     20,000,000 

1904 21,500,000     25,000,000 

1905 65,000,000       20,000,000 

1906 45,000,000    25,000,000  95,360,200 

1907 io, 750, ooo 

1908 30, ooo, ooo 

FOREIGN  MORTGAGE  BONDS, 

1897 51,  000,000 

1904 34, ooo, ooo 


«  Only  those  years  are  given  during  which  issues  were  made. 
b  Including  private  banking  firms. 


960 


The     German     Great     Banks 


Value  of  neivly  issued  securities  listed  at  all  German  stock  exchanges  during 
the  years  1897-1908  —  Continued. 


GERMAN  RAILWAY  SHARES. 


Year.o 


Issued 

exclusively 

by  the  bank. 


Issued 
jointly  with 
other  great 

banks. 


Issued 
jointly  with 
other  banks.& 


Issued 

jointly  with 

other  banks 

and  great 


Marks.  Marks.  Marks.  Marks 

1897 1,250,000 

19, 800, ooo 

1900 I,  200,  000 

1902 11,450,000 2,000,000 

I9°4 14,297.000 

1906 4  024  000 

II, OOO, OOO 

GERMAN  RAILWAY  BONDS. 

i897 5,700,000     2,500,000 

1898 7, 500, ooo     

1900 i, 300, ooo     3>  ooo, ooo 

1901 5, 500, ooo 

1902 , 4>  ooo,  ooo 

1905 10,  ooo, ooo     5, ooo, ooo 

1906 7, ooo, ooo     4, 500, ooo 

1908 4, ooo, ooo     

FOREIGN  RAILWAY  BONDS. 

1898 48, ooo, ooo 

1899 48, ooo, ooo 

1901 80,  ooo,  ooo 

1906.  . I,  687,  500 

1907 42, ooo,  ooo 

BANK  SHARES. 

1897 16,200,000  

1898 78,101,000  8,000,000 

1899 i, 500, ooo  17. ooo, ooo 

1900 3,000,000 

I9OI 24,  000,  000 

1902 52, ooo, ooo     

1903 4, ooo, ooo 

a  Only  those  years  are  given  during  which  issues  were  made. 

&  Including  private  banking  firms. 


90311"— II- 


961 


National    Monetary     Commissio 


n 


Value  of  newly  issued  securities  listed  at  all  German  stock  exchanges  during 
the  years  1897-1908 — Continued. 


BANK  SHARES— Continued. 


Year.a 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.  & 

Issued 
jointly  with 
other  banks 
and  great 
banks.  & 

1904  

Marks. 

Marks. 

Marks. 

Marks. 

1906. 

1907  
1908.  . 

3,  400,  ooo 

20,  ooo,  ooo 

INDUSTRIAL  SHARES. 


1897  

2,  944,  ooo 

1898. 

2,  936,  000 

9,  500,  ooo 

9,  750,  ooo 
29,  ooo,  ooo 
5,  200,  ooo 

2,  OOO,  OOO 
2,  500,  000 

20,  000,  OOO 

74,  ooo,  ooo 
48,  700,  ooo 

1899  

1900 

1901  
1902  . 

41,  ooo,  ooo 
30,  675,  ooo 
4,  050,  ooo 
19,  009,  ooo 
33,  ooo,  ooo 
49,  500,  ooo 
5,  150,  ooo 
6,  810,  ooo 

I,  000,  000 

5  ,  ooo,  ooo 
3,  ooo,  ooo 
i,  450,  ooo 
96,  ooo,  ooo 

IO2,  OOO,  000 
24,  2OO,  OOO 

2,  750,000 

i,  250,  ooo 

28,  ooo,  ooo 

12,  500,  OOO 

25,  ooo,  ooo 
80,  311,  ooo 
173,  589,  ooo 
43,  ooo,  ooo 
54,  530.000 

1903  

1904 

1905  

1906 

i,  400,  ooo 

7,  500,000 
3,  300,  ooo 

1907  
1908  

INDUSTRIAL  BONDS. 


1898  

1899  

1900  

1901 

35,000,00 

1902  . 

6 

4,000,000 

23,000,00 

1903  

, 

1904  . 

1905  

, 

,500,009 

1906  . 

17,000,000 

1907  

I  ,  OOO,  OOO 

3  ,  500,  ooo 

1908  

a  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


962 


The     German     Great    Banks 

BERLINER  HANDELS-QESELLSCHAFT. 

Total  value  of  securities  issued  at  all  German  stock  exchanges  during  the  years 

1897-1908. 


Year.a 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.& 

Issued 
jointly  with 
other  banks 
and  great 
banks.& 

1897  

Marks. 
25,  848,  ooo 
13.  980,  ooo 
19,  600,  ooo 
10,  500,  ooo 
4,  ooo,  ooo 
171,  508,  800 
io,  225,  ooo 
19,  ooo,  ooo 
28,  350,  ooo 

21,  173,  750 

8,  ooo,  ooo 
18,  ooo,  ooo 

Marks. 

29.  350,  OOO 

69,  700,  500 
85,  ooo,  ooo 

15,  2OO,  OOO 

54,  200,000 
73.  3°o,  ooo 
63,  ooo,  ooo 
35,500,000 

112,  ISO,  OOO 

69,  100,  ooo 
73,  296,  ooo 
69,  910,  ooo 

Marks. 
65.685,500 
40,  700,  ooo 
85,  198,000 
28,  500,  ooo 

Marks. 
288,  760,  ooo 

313.598.500 

155.  100,  OOO 

104,300,  ooo 
235,  ooo,  ooo 
478,  800,  ooo 

3,396,623,974 

65,  ioo,  ooo 
604,  ooo,  ooo 
254,309,  ooo 
6,591,435.  232 
438,  920,  ooo 

1898 

1899.    .    . 

1900  

1901  

22,350,  ooo 
16,  100,  ooo 
38,  250,  ooo 
14,000,  ooo 

1903  

1905  .  .  . 

1906  

1907  

24,  920,  ooo 
62,  ooo,  ooo 

1908 

Value  of  newly  issued  securities  listed  at  all  German  stock  exchanges  during 
the  years  1897-1908. 

GERMAN  PUBLIC  SECURITIES. 


Year,  a 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.  & 

Issued 
jointly  with 
other  banks 
and  great 
banks.  & 

1897  

Marks. 

Marks. 

2,  75O    OOO 

Marks. 

Marks. 

1899 

1900  

14,  ooo,  ooo 

1901  

3  ,  ooo,  ooo 

1902  

12,  OOO,  OOO 

1903  

3  ,  ooo,  ooo 

1905  

8,  ooo,  ooo 

24,  ooo,  ooo 
26,  ooo  ooo 

1907 

9,  796,  ooo 

12,  OOO,  OOO 

20,  ooo,  ooo 

1908  

3,  ooo,  ooo 

60,  ooo,  ooo 

85,  ooo,  ooo 

o  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


963 


National    Monetary     Commission 

Value  of  newly  issued  securities  listed  at  all  German  stock  exchanges  during 
the  years  1897-1908 — Continued. 


FOREIGN  PUBLIC  SECURITIES. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.  & 

Issued 
jointly  with 
other  banks 
and  great 
banks.6 

!&g8  

Marks. 

Marks. 
46,  406,  500 

Marks. 

Marks. 

66,  300,  ooo 

393   ooo  ooo 

28,  350,  ooo 

1908        

127,  500,  ooo 

GERMAN  MORTGAGE  BONDS. 


1898 

20  ooo  ooo 

1899  

70,  ooo,  ooo 

20,  ooo,  ooo 

1903  

40,  ooo  ooo 

1904  

15,  ooo,  ooo 

1905  

75,  ooo  ooo 

1907  

IO,  OOO,  OOO 

1908    

FOREIGN  MORTGAGE  BONDS. 


1902  

1904  

ii  ,  250,  ooo 

1906  

GERMAN  RAILWAY  SHARES. 

1897.  

3,  500,  ooo 
6,  500,  ooo 
ii,  050,  ooo 
8,  600,  ooo 

1898  

I  ,  400,  ooo 

1899  

2,  IOO,  OOO 

8,  500,  ooo 
600,  ooo 

1902  

1903  

3  ,  725  ,  ooo 

1904  

5,  300,  ooo 
4,  024,  ooo 

II,  000,  000 

1906 

1908  

a  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


964 


The     German     Great     Banks 

Value  of  newly  issued  securities  listed  at  all  German  stock  exchanges  during 
the  years  1897-1908—  Continued. 


GERMAN  RAILWAY  BONDS. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.  b 

Issued 
jointly  with 
other  banks 
and  great 
banks.b 

1897  

Marks. 

Marks. 

Marks. 

Marks. 

1898  

i,  830,  ooo 

1899  

' 

1900  

1901  

4,  ooo,  ooo 

1902  

4,000,000 

1903  

i,  500,  ooo 

1904  

2,  OOO,  OOO 

1906  

4,300,00 

1907  

2,  OOO,  OOO 

00,000 

FOREIGN  RAILWAY  BONDS. 


1897 

1898  

3,210,000 

1899  

. 

1901  

1902  

170,  158,  800 

1906 

1907  

BANK  SHARES. 


1897 

1898  

1899  

7,  500,  ooo 

IO,  OOO,  OOO 

5,  ooo,  ooo 

8,  ooo,  ooo 

8,  ooo,  ooo 

1903  

4,  ooo,  ooo 

12,  SOO,  OOO 

16,  ooo,  ooo 

IO,  OOO,  OOO 

20,  000,  000 

1908 

8,  ooo,  ooo 

a  Only  those  years  are  given  during  which  issues  were  made. 
b  Including  private  banking  firms. 


965 


National    Monetary     Commission 

Value  of  newly  issued  securities  listed  at  all  German  stock  exchanges  during 
the  years  1897-1908 — Continued. 


INDUSTRIAL  SHARES. 


Year.0 

Issued 
exclusively 
by  the  bank. 

Issued 
,  jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.  & 

Issued 
jointly  with 
other  banks 
and  great 
banks.6 

1897  

Marks. 

12,  3SO,  OOO 

Marks. 

Marks. 

Marks. 

1898 

1899  

7,  500,  ooo 

8,  ooo,  ooo 

9,398,000 

91,  850  ooo 

18,  200  ooo 

1902  

I  ,  OOO,  OOO 

29  050  ooo 

1903                .        .... 

5,000   ooo 

IO,  OOO     OOO 

1904  

I,  OOO,  OOO 

I  I  ,  OOO,  OOO 

1906  

10,  250,  ooo 

17,  800,  ooo 

1907  

4,  ooo,  ooo 

9,  ooo,  ooo 

55,  870  ooo 

1908 

INDUSTRIAL  BONDS. 


1897   

IO,  OOO,  OOO 

26,  600,  ooo 

1808 

1899        

1900  
1901  
1902      

7.  500,  ooo 

16,000,  ooo 

29,  ooo,  ooo 
55,  ooo,  ooo 

1903  

6,  ooo,  ooo 

4,  500  ooo 

1905    

6,  500,  ooo 

1906  

4,  800,  ooo 

1908  

21,  5OO,  OOO 

I,  OOO,  OOO 

161,320,  ooo 

o  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


966 


The     German     Great     Bank 


DEUTSCHE  BANK. 

Total  -value  of  securities  issued  at  all  German  stock  exchanges  during  the  years 

1897-1008. 


Year.** 

Issued 

exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.6 

Issued 
jointly  with 
other  banks 
and  great 
banks,  b 

1897  
1898  

Marks. 
103,  955,  ooo 
258,  279,  480 

Marl*. 

II,  700,  OOO 

68,  406,  500 

Marks. 

27,  950,  000 

247,  149,  480 

Marks. 
65,  800,  ooo 

1899                       

347  i  33°   ooo 

1900      

476,  497  ,  ooo 

74.  59i  .  200 

61  ,  228,  ooo 

217,  030,  ooo 

140,  500,  ooo 

172,  632   ooo 

1903  

656,  134,  040 
736   019   800 

60,  750,  ooo 
82   887,000 

131,  566,  300 
843   338,408 

3,  221,  204,490 

688,  797,  900 

235  ,  687,  ooo 

129,  842,  ooo 

i  >  346,  550,  ooo 

1906  

762,  043,  800 
262   763   600 

267,  037,  ooo 
370,  270,  ooo 

291,  125,000 
107,  915,  ooo 

I.  555.674,856 

7,  100,  435  ,  232 

1908  

241,  945,  ooo 

221,  264,  000 

3  18,  900,  ooo 

ii  315,  865,  ooo 

o  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 

Value  of  newly  issued  securities  listed  at  all  German  stock  exchanges  during 
the  years  1897-1908. 

GERMAN  PUBLIC  SECURITIES. 


Year." 

Issued 

exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.6 

Issued 
jointly  with 
other  banks 
and  great 
banks.6 

Marks. 

Marks. 

Marks. 

2,  450,  000 

Marks. 
24,  000,000 

3  ,  ooo,  ooo 

7,  500,  ooo 

10,  000,  000 

48,  200,  ooo 

5  ,  ooo,  ooo 

3,  228,  ooo 

59,  ooo,  ooo 

1901  

13,310,000 
13,  800,  ooo 

172,  500,  ooo 
45,  ooo,  ooo 

94,  570,000 
5  ,  272,  ooo 

42,  ooo,  ooo 
388,  ooo,  ooo 

1903  

11.873,  200 

17,  600,  ooo 

3,  500,000 
20,  937,  ooo 

I,  000,  000 

3  ,  800,  ooo 

81,865,000 
448,317,000 

28,  ooo,  ooo 

58,  937,000 

3,  952,  ooo 

450,  ooo,  ooo 

42,  400,  ooo 

83,  437.ooo 

32,  ooo,  ooo 

1,321,  720,  600 

59,  464,  ooo 

i  25  ,  ooo,  ooo 

io,  165,  ooo 

481,  500,  ooo 

1908                              •  • 

52,  575,  ooo 

123,  654,  900 

245,  ooo,  ooo 

I,  016,325,  ooo 

Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 

967 


National    Monetary     Commission 


Value  of  newly  issued  securities  listed  at  all  German  stock  exchanges  during 
the  years  1897-1908 — Continued. 

FOREIGN  PUBLIC  SECURITIES. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.6 

Issued 
jointly  with 
other  banks 
and  great 
banks.6 

t898                 

Marks. 
i  16,  767  ,  080 

Marks. 
46,  406,  500 

Marks. 
86,  551.080 

Marks. 
423  ,  806,  500 

463  ,  080,  ooo 

7,  818,  750 

66.300  ooo 

85,  860,  ooo 

4,  387,  500 

3  ,  121,  539,  490 

798,  219   408 

216  960,  ooo 

698   700,  ooo 

1906          

75,  850,  ooo 

173  ,  400,  ooo 

142   800,  ooo 

6   481    565    232 

1908                             

64,  260,  ooo 

GERMAN  MORTGAGE  BONDS. 


1898 

1899        

5,000  ooo 

70  ooo.  ooo 

IO  OOO.  OOO 

1900  

55.  ooo.  ooo 

IO  OOO,  OOO 

30,  ooo.  ooo 

35  ,  ooo  ooo 

1902  

IOI.  OOO,  OOO 

IO,  OOO  OOO 

60,  ooo,  ooo 

126  000,000 

45,  ooo.  ooo 

29,  ooo  ooo 

1906        

45  ooo  ooo 

15  ,  ooo,  ooo 

50  ooo  ooo 

1907  

80  ooo,  ooo 

IO,  OOO,  OOO 

60,  ooo,  ooo 

1908 

FOREIGN  MORTGAGE  BONDS. 


1898  

8,  100,  ooo 

1899    .    

1900  

13  >  93  1  200 

1902  

33,  750,  ooo 

1903  

45,  ooo  ooo 

1904  

67,  500.  ooo 

1905  

a  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


The     German     Great    Banks 

Value  of  newly  issued  securities  listed  at  all  German  stock  exchanges  during 
the  years  1897-1908 — Continued. 

GERMAN  RAILWAY  SHARES 


Year.a 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.fr 

Issued 
jointly  with 
other  banks 
and  great 
bahks.& 

1897  

Marks. 

Marks. 

Marks. 

Marks. 

1898  

5,  400,  ooo 

' 

1899  

1900  

1901  

i  ,  800,  ooo 

1902  

26'°oo'ooo 

1906               

i  ,  700  ooo 

, 

1908  

4,  210,  ooo 

GERMAN  RAILWAY  BONDS. 


18 

1899 

5,  ooo,  ooo 

900,  ooo 

23  ,  650,  ooo 

I9O3   

2,  OOO,  OOO 

4  300,  ooo 

IO,  OOO,  OOO 

FOREIGN  RAILWAY  SHARES. 


1800 

52,  500,  ooo 

48,  960,  ooo 

9 

80,  ooo,  ooo 

9 

105  ,  ooo,  ooo 

1905  

BANK  SHARES. 


25,  500,000 

S2'°00>6oo 

8,  ooo,  ooo 

1800.  . 

20,  880,000 

o  Only  those  years  are  given  during  which  issues  were  made. 
b  Including  private  banking  firms. 


969 


National    Monetary     Commission 


Value  of  newly  issued  securities  listed  at  all  German  stock  exchanges  during 
the  years  1897-1908 — Continued. 

BANK  SHARES— Continued. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.6 

Issued 
jointly  with 
other  banks 
and  great 
banks.  b 

Marks. 
18,  ooo,  ooo 

Marks. 

Marks. 

Marks. 

24,  ooo,  ooo 

10,  252,  ooo 

44   750,  800 

12,  5OO,  OOO 

1905  

109,  500,  800 

4,  500,  ooo 

14,  400,  ooo 

16,  ooo,  ooo 

72,  816   ooo 

34,  ooo,  ooo 

13,  500,  ooo 

6,  250,  ooo 

1908 

INDUSTRIAL  SHARES. 


1897 

1898. 

7  810  800 

4,  ooo,  ooo 

36,  498,  400 

37  198  400 

1899  

39,  ooo,  ooo 

91  ,  850,  ooo 

1900 

4901  
1902 

44,  518,800 

18,  200,  ooo 

750,  ooo 

5,  ooo,  ooo 

1903  

1904  

10,  100,  000 

29,  669,  ooo 

ii,  250,  ooo 

2,  45O,  OOO 

I,  000,  000 

30,  969,  ooo 

5,  ooo,  ooo 
26,  600,  ooo 

1905  

20,  273  ,  500 

59,  250  ooo 

1906  

25  ,  235  ,  ooo 

36,  800,  ooo 

22  ,  225  ,  OOO 

162  300  ooo 

1907  .    

1908  

75,  950,  ooo 

35  ,  900,  ooo 

18,  900,  ooo 

INDUSTRIAL  BONDS. 


1897  

1898. 

3,  500,000 
8,  ooo,  ooo 
5,  500,000 
6,  ooo,  ooo 

5,  000,000 

6,  500,  ooo 

I,  100,  000 

20,  000,  OOO 

24,  ooo,  ooo 
29,  ooo,  ooo 
55,  ooo,  ooo 
20,  700,  ooo 

12,  800,  000 

9,  400,  ooo 
7,  500,  ooo 

15,  200,  OOO 

44,  700,  ooo 
168,  250,000 

1899  

1900  
1901  

36,  ooo,  ooo 

I,  000,  000 

30,  500,  ooo 
13,  ooo,  ooo 
57,  800,  ooo 
46,  470,  ooo 
27,  500,  ooo 

43,  ooo,  ooo 

12,  528,  000 

36,  925,  ooo 
6,  500,  ooo 
38,  650,  ooo 
15,  500,  ooo 

II,  800,  000 
40,  2OO,  000 

16,  ooo,  ooo 
15,  178,  800 
10,  350,  ooo 
8,  740,  ooo 

1903  

1904 

1905  

1906  . 

1907  

20,  750,  000 

1908  . 

a  Only  those  years  are  given  during  which  issues  were  made. 
b  Including  private  banking  firms. 

970 


The     German     Great    Banks 

mSCONTO-GESELLSCHAFT. 

Total  -value  of  securities  issued  at  all  German  stock  exchanges  during  the  years 

1897-1908. 


Year.* 

Issued 
exclusively 
by  the  bank. 

^Issued 
jointly  with 
other  great 
banks. 

^Issued 
jointly  with 
other  banks.  & 

Issued 
jointly  with 
other  banks 
and  great 
banks.  & 

1897  

Marks 
711,  692   ooo 

Marks. 

Marks. 

Marks. 

1898 

3   5'^6o'°°0 

1899 

1900  

122,  6lO,  000 

23,  031,  200 

204,  200,  000 

240,  450,  ooo 

1902  

172  ooo  ooo 

5    1,492,000 

1903  

213,  615,  188 

32   213   ooo 

1905  

2,  193  ,222     OOO 

1906  

93,  022,  340 

1  80   43  7,  ooo 

25     942     2OO 

1908  

137.  850,  ooo 

Value  of  newly  issued  securities  listed  at  all  German  stock  exchanges  during 
the  years  1897-1908. 


GERMAN  PUBLIC  SECURITIES. 


Year.* 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.6 

Issued 
jointly  with 
other  banks 
and  great 
banks.& 

1897                  

Marks. 
18,  SS2,  500 

Marks. 

2,  75O,  OOO 

Marks. 
40,  ooo,  ooo 

Marks. 

1898  
1899 

4,  ooo,  ooo 
7,  500,  ooo 

6,  ooo,  ooo 

12,  000,  OOO 

1900                  

8,  ooo,  ooo 

7,  500,  ooo 

1901  

6,  275,800 

169,  ooo,  eoo 

67,  ooo,  ooo 

10,  000,  OOO 

138,  ooo,  ooo 

9,  500,  ooo 

64,  960,  roo 

1904  

94,  ooo,  ooo 

ii.  937.  ooo 

30,  ooo,  ooo 

408,317.000 

1905 

15,  488,  ooo 

23,  937,  ooo 

31,  500,  ooo 

474,  ooo,  ooo 

26,  ooo,  ooo 

127,  296,  ooo 

25,  ooo,  ooo 

434,  ooo,  ooo 

1908  

43,  200,000 

106,  ooo,  ooo 

7,  ooo,  ooo 

1,133.325,000 

a  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


971 


National    Monetary     Commission 

Value  of  newly  issued  securities  listed  at  all  German  stock  exchanges  during 
the  years  1897-1908 — Continued. 


FOREIGN  PUBLIC  SECURITIES. 


Year.o 

Issued 
exclusively 
by  the  bank. 

•  Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.  & 

Issued 
jointly  with 
other  banks 
and  great 
banks.6 

1897  

Marks. 

Marks. 

Marks. 
286,  900,  ooo 

Marks. 

1898 

1899.               

357,  200  ooo 

1900  

151  ,  200,  ooo 

IO2     OOO    OOO 

1901  . 

1902  

561  ,  600  ooo 

1903 

1904  

1907  .  .               ... 

1008 

GERMAN  MORTGAGE  BONDS. 


1897 

1898  

31  ooo  ooo 

1900  

IO,  OOO,  OOO 

30  ooo  ooo 

1901  ,  .  .  . 

22,  4OO,  OOO 

1902  

70,  ooo,  ooo 

30,  ooo  ooo 

1903  

150,  ooo,  ooo 

IO,  OOO,  OOO 

1904  

66  ooo  ooo 

1906  

1908. 

FOREIGN  MORTGAGE  BONDS. 


1897  .  . 

• 

1898. 

1 

1900  

1907  

o  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


972 


The     German     Great     Banks 

Value  of  newly  issued  secureties  listed  at  all  German  stock  exchanges  during 
the  years  1897-1908 — Continued. 


GERMAN  RAILWAY  SHARES. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.  6 

Issued 
jointly  with 
other  banks 
and  great 
banks.6 

1897  

Marks. 

Marks. 

Marks. 

Marks. 

1898  

1899  

1900  

6,  ooo,  ooo 

1901  

i,  560,  ooo 

1904  

1906  

3,  199,  200 

1908  

GERMAN  RAILWAY  BONDS. 


1897  

1898  

2,500.000 

1899  

25,  ooo,  ooo 

1900  

1901  

i,  560  ooo 

1905  

9,500,00 

1906  

5,000,00 

1907  

500,  ooo 

4,500,00 

1908  

FOREIGN  RAILWAY  SHARES. 


1897  

1898  

1899  

1900  .... 

126,  ooo,  ooo 



1901  

1903 

56  522  688 

1904  .  .  . 

1905  

2,  IOO,  OOO,  OOO 

105,  ooo,  ooo 

1906 

I  687,  500 

BANK  SHARES. 


1897  

1898 

6,  ooo,  ooo 
9,  ooo,  ooo 



18,  ooo,  ooo 
8,  ooo,  ooo 

1890.  .  , 

4,  ooo,  ooo 

17,000,  ooo 

a  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


973 


National    Monetary     Commission 

Value  of  newly  issued  secureties  listed  at  all  German  stock  exchanges  during 

the  years  1897-1908 — Continued. 

BANK  SHARES— Continued. 


Year.a 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.6 

Issued 
jointly  with 
other  banks 
and  great 
banks.  & 

Marks. 

Marks. 

Marks. 

Marks. 

1902  

36,  500,  ooo 

7,  713,  ooo 

IO,  OOO,  OOO 

1904  

30,  ooo,  800 

9,  ooo,  ooo 

12,  500,  OOO 

I9°S  

30,  834,  ooo 

16,  ooo,  ooo 

16,  ooo,  ooo 

1906  

3,  508,  ooo 

6,000,  ooo 

8,  000,000 

23,  250,  ooo 

1907  

21,  999,  600 



33,  600,000 

20,  000,  000 

INDUSTRIAL  SHARES. 


1897  
1898  

1899 

15,  ooo,  ooo 
12,  180,  900 

II,  751,  600 

5,  ooo,  ooo 

24,  800,000 

1900  
1901  

31,  ioo,  ooo 
4,  768,  800 

9,  ioo,  ooo 

5,  ooo,  ooo 

52,  750,  ooo 

1902  

1903  

3  ,  ooo,  ooo 

5,  ooo,  ooo 

1904  
1905  

27,  ooo,  ooo 
14,  900,  ooo 

50,  ooo,  ooo 

6,  200,  ooo 

5,  ooo,  ooo 
41,  250,  ooo 

1907  

1908 

4,  500,  ooo 

126,  ooo,  ooo 



58,  450,  ooo 

INDUSTRIAL  BONDS. 


1897  

21,  6OO,  OOO 

1898  

1899  

1900  
1901  
1902  

6,  ooo,  ooo 
27,  500,  ooo 

2,  SOD,  OOO 

10,  000,  000 

IO,  OOO,  OOO 

35,  ooo,  ooo 
45,  500,000 

1903  

1904  

1905  

,000,00 

1907  

3,000,000 

1908  

o  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


974 


The     German     Great     Banks 


DRESDNER   BANK. 

Total  value  of  securities  issued  at  all  German  stock  exchanges  during  the  years 


Year.o 

Issued 

exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.6 

Issued 
jointly  with 
other  banks 
and  great 
banks.6 

1897  
1898                

Marks. 
85,  350,  ooo 

Marks. 

Marks. 
82,  ooo,  ooo 

Marks. 

23.  750,  OOO 

1 

1899  

101  ,  700,  ooo 

44,700,00 

142,900,00 

1902          

59,  546,  900 

136,  122  ,  4OO 

458,  270,  ooo 

1906  

65  ,  55  1  ,  400 

32O,  415  ,  2OO 

662,  400,  ooo 

J>  SOQ,  72O    806 

1908                

210,  734,  400 

280,  654,  9OO 

32,  500,  ooo 

Value  of  newly  issued  securities  listed  at  all  German  stock  exchanges  during 
the  years  1897-1908. 

GERMAN  PUBLIC  SECURITIES. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.6 

Issued 
jointly  with 
other  banks 
and  great 
banks.6 

1897  

Marks. 
i,  750,  ooo 

Marks. 

Marks. 
20,  ooo,  ooo 

Marks. 

20,  OOO.OOO 

1898 

75  ,  ooo,  ooo 

1899  
1900  

10,  000,  000 

13  ,  ooo,  ooo 

5,  ooo,  ooo 

112,  OOO,  OOO 

IS,  700,  ooo 
50,  oo'o,  ooo 

15,  ooo,  ooo 

i  18,  ooo,  ooo 

9,  800,  ooo 

17,  ooo,  ooo 

14,  ooo,  ooo 

3,  ooo,  ooo 

37,  280,  ooo 

416,  ooo,  ooo 

54,  904,  900 

6,  ooo,  ooo 

48,  779,  ooo 

6,  200,  000 

460,317.000 

1905  

5,  652,  400 

IO,  OOO,  OOO 

67,  ooo,  ooo 
81,  500,  ooo 

16,  500,000 
562,  400,  ooo 

443,  000,000 
i,  277,  720,600 

25  ,  500,  ooo 

63,  720,  ooo 

12,  000,  000 

460,  000,000 

1908  

7,  ooo,  ooo 

118,  154,  900 

29,  500,  ooo 

955,  000,000 

a  Only  those  years  are  given  during  which  issues  were  made. 
6  Including  private  banking  firms 


975 


National     Monetary     Commission 

Value  of  newly  issued  securities  listed  at  all  German  stock  exchanges  during 
the  years  1897-1908 — Continued. 


FOREIGN  PUBLIC  SECURITIES. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.6 

Issued 
jointly  with 
other  banks 
and  great 
banks.6 

1898 

Marks. 

Marks. 

Marks. 
51  ,  ooo,  ooo 

Marks. 

1800 

463,  080,  ooo 

13,  691  ,  250 

242,  250,  ooo 

1905  

7,  875,  ooo 

77,  520,000 
142  ,  800,  ooo 

698,  700,  ooo 

6,  481  ,  565  ,  232 

1908  

199,834,400 

64,  260,  ooo 

GERMAN  MORTGAGE  BONDS. 


1800 

30,  ooo,  ooo 

30,  ooo,  ooo 

25  ,  ooo,  ooo 

35  ,  ooo,  ooo 

15  ,  ooo,  ooo 

95  ,  ooo,  ooo 

95  ,  360,  200 

1907  

1908 

55,  ooo,  ooo 

60,  750,  ooo 

FOREIGN  MORTGAGE  BONDS. 


GERMAN  RAILWAY  SHARES. 


GERMAN  RAILWAY  BONDS. 

1898 

1899  

25,  ooo,  ooo 
6,  479,  ooo 
8,839,000 

1901.  . 

o  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


976 


The     German     Great     Banks 


Value  of  newly  issued  securities  listed  at  the  German  stock  exchanges  during 
the  years  1897-1908 — Continued. 

GERMAN   RAILWAY  BONDS— Continued. 


1903  

i  ,  500,  ooo 

7,  ooo,  ooo 

1905  

1906  

II,  900,  OOO 

13,504,  256 

1008 

4,  ooo,  ooo 

2,  000,  OOO 

FOREIGN  RAILWAY  SHARES. 

48,  ooo,  ooo 
25  ,  500,  ooo 

80,000,000 

I9O5  

25,  ooo,  ooo 

15.300,000 

FOREIGN  RAILWAY  BONDS. 

I,  687,  500 

GERMAN  STREET  RAILWAY  SHARES. 

i,  350,  ooo 

i,  250,  ooo 

6,  ooo,  ooo 

I  ,  2OO,  OOO 

1901  

I,  000,  000 

26,  795,000 

14,  297,  ooo 
500,  ooo 

9 

GERMAN  STREET  RAILWAY  BONDS. 

1897  

2,  500,000 

3,ooo,ooc 
5,500,ooc 

a  Only  those  years  are  given  during  which  issues  were  made. 
6  Including  private  banking  firms. 

90311°—  J  i  63                     977 

National    Monetary     Commission 

Value  of  newly  issued  securities  listed  at  all  German  stock  exchanges  during 
the  years  1897-1908 — Continued. 


BANK  SHARES. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.  & 

Issued 
jointly  with 
other  banks 
and  great 
banks.6 

Marks. 

Marks. 

Marks. 

Marks. 

1898 

l899 

29,  600,  ooo 

7,  713,  ooo 

41  ,  ooo,  ooo 

25  ,  ooo,  ooo 

12  ,  5OO,  OOO 

1905  

300,  ooo 

6,  500,  ooo 

22  ,  IOO,  OOO 

16,  ooo,  ooo 
6,  250,  ooo 

INDUSTRIAL  SHARES. 


1897 

i  ,  750,  ooo 

2,  060,  OOO 

1898 

8  851  600 

1899 

7,  850,  ooo 

40,  100,  ooo 

29,  ooo,  ooo 

1900  .    

25  ,  134,  400 

9,  200,  ooo 

53  ,  700,  ooo 

600  ooo 

1902  
1903  

i,  500,  ooo 
7,  460,  ooo 

19,  200,  ooo 
i,  250,  ooo 

i  ,  260,  ooo 

28,  ooo,  ooo 
23  ,  500,  ooo 

1904 

20,  193  ,  ooo 

10,  950,  ooo 

18,  600,  ooo 

1905  

28,  195,  ooo 
9  550,  ooo 

6  1  ,  950,  ooo 
79>  3  15  <  2°° 

2,  2OO,  OOO 

5  ,  ooo,  ooo 

49,  800,  ooo 

1907  

1908 

5,  720,  ooo 

37,  ooo,  ooo 

3,  ooo,  ooo 

41,  250,  ooo 

INDUSTRIAL  BONDS. 


1897 

2  SCO,  OOO 

1898  

1899 

12,  000,  000 

40,  ooo,  ooo 

1900  
1901  

4,  ooo,  ooo 

IO,  OOO,  OOO 

2,  500,  000 
2,  5OO,  OOO 

35,  ooo,  ooo 
45  ,  500,  ooo 

1902 

16,  ooo,  ooo 

3  ,  ooo,  ooo 

1904             .  .  . 

9  700  ooo 

20,  ooo,  ooo 

1905  

1906 

I,  600,  000 

10,  000,  000 

4,  ooo,  ooo 

6,  ooo,  ooo 

1907  
1908  

3,  ooo,  ooo 

33.970,000 

45,  500,  ooo 

27,  500,  ooo 
171,  320,  ooo 

«  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 


978 


The     German     Great     Banks 

A.  SCHAAFFHAUSEN'SCHER  BANKVEREIN. 

Total  -value  of  securities  issued  at  all  German  stock  exchanges  during  the  years 

1897-1908. 


Year.o 

Issued 

exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.  & 

Issued 
jointly  with 
other  banks 
and  great 
banks.  & 

1897  
1898 

Marks. 
127,  558,  600 

Marks. 

I  I  ,  OOO,  OOO 

Marks. 
17,  870,  ooo 

Marks. 

20,  000,  000 

1899  
1900  

85,450,000 
45,  700,  ooo 

27,  780,  ooo 
18,  600  ooo 

1,350,000 

29,  700,  ooo 

30,450,00 

1902  
1903  

46,  ooo,  ooo 
i  i,  600,  ooo 

I  I  ,  OOO,  OOO 

43,  400,  ooo 

26,  ooo,  ooo 

76,  ooo,  ooo 

1904 

39   284   ooo 

1905  
1906  

20,  550,  000 

60,  500,  ooo 

290,  297,  770 
185,  815  ,  200 

31,  250,  ooo 
31,  ooo,  ooo 

749,  600,  ooo 

184,  684  600 

1908  

5,  100,  ooo 

238,  320,  ooo 

30,  ooo  ooo 

<*  Only  those  years  are  given  during  which  issues  were  made. 
&  Including  private  banking  firms. 

Value  of  newly  issued  securities  listed  at  German  stock  exchanges  during  the 
years  1897-1908. 

GERMAN  PUBLIC  SECURITIES. 


Year.o 

Issued 
exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks.6 

Issued 
jointly  with 
other  banks 
and  great 
banks.* 

1897  

Marks. 
3,500,000 

Marks. 
4,  ooo,  ooo 

Marks. 
17,  500,  ooo 

Marks. 

20,  000,  OOO 

1800 

7,  500,  ooo 

15,  700,000 

10,  000,  000 

40,  ooo,  ooo 

2,  500,  000 

15,000,  ooo 

5,  ooo,  ooo 

1902  

23,000,  ooo 

6,  ooo,  ooo 

26,  ooo,  ooo 
30,000,  ooo 

50,  ooo,  ooo 

39.  779.  00° 

408,  317,  ooo 

i  8,  ooo,  ooo 

10,  OOO,  000 

30,000,  ooo 

2    OOO    OOO 

30,  ooo,  ooo 

41,  220,  000 

30,  ooo,  ooo 

1908                            .     ... 

96,  500,  ooo 

30,  ooo,  ooo 

65,  ooo,  ooo 

a  Only  those  years  are  giv)n  during  which  issues  were  made. 
&  Including  private  banking  firms. 


979 


National    Monetary     Commission 

Value  of  newly  issued  securities  listed  at  all  German  stock  exchanges  during 
the  years  1897-1908 — Continued. 


FOREIGN  PUBLIC  SECURITIES. 


Year.c 


Issued 

exclusively 

by  the  bank. 


Issued 

jointly  with 

other  great 

banks. 


Issued 
jointly  with 
other  banks.  *> 


Issued 

jointly  with 

other  banks 

and  great 

banks.  & 


Marks.                   Marks.                   Marks.  Marks. 

1905 77, 625, 170     678,300,000 

GERMAN  MORTGAGE  BONDS. 

l897 20,  OOO,  OOO     j 

1898 60,000,000  

1900 30,000,000  

I9O2 20,  000,  000  I 

1903 !     20,  000,  OOO 

1904 no,  ooo,  ooo 

1905 165,000,000  15,000,000 

1907 45,000,000  50,000,000 

1908 60, ooo, ooo 

GERMAN  RAILWAY  SHARES. 

1898 5, ooo, ooo  5, ooo, ooo 

1899 5, ooo, ooo 

1900 9, 200, ooo 

1904 14, 297, ooo 

1906 4, 024, ooo 

1908 n,  ooo,  ooo 

FOREIGN  RAILWAY  SHARES. 

1901 60, ooo, ooo 

1904 25, 500, ooo 

1905 15,300,000 

1906 I, 687, 500 

GERMAN  RAILWAY  BONDS. 

1898 10,000,000  10,000,000 

1900 13, ooo, ooo 

1901 9, 500, ooo 

1904 3 , 680 , ooo     

1905 i . 250, ooo  1 1 , 900, ooo 

1906 4, 500, ooc 


a  Only  those  years  are  given  during  which  issues  were  effected. 
&  Including  private  banking  firms. 


980 


The     German     Great     Banks 

Value  of  newly  issued  securities  listed  at  German  stock  exchanges  during  the 
years  1897-1908— Continued. 


BANK  SHARES. 


Year.o 

Issued 

exclusively 
by  the  bank. 

Issued 
jointly  with 
other  great 
banks. 

Issued 
jointly  with 
other  banks,  6 

Issued 
jointly  with 
other  banks 
and  great 
banks.6 

1897  

Marks. 
30,  ooo  ooo 

Marks. 

Marks. 

Marks. 

1898  

5  ,  500  ooo 

' 

1899  

34,  800,  ooo 

,000,00 

1901  

1904  

25  ,  ooo   ooo 

1905  

8,  750,  ooo 

I           00,000 

1906              

,000,00 

1907  

180,  ooo  ooo 

,250,00 

INDUSTRIAL  SHARES. 


1897  

74,  058,  600 

370  ooo 

1898  

1899  

29,  589,  ooo 
40,  650,  ooo 

16,  044,  ooo 
8,  280  ooo 

9,  750,  ooo 

1901  

4,  200  ooo 

1902  

3,  ooo,  ooo 

8,  ooo  ooo 

1904  

1905  

12,  784,  000 

4,  800,  ooo 

25  ,  400,  ooo 
5,872,  600 

I  ,  62O,  OOO 

21,  OOO,  OOO 
22,  4OO,  OOO 

1906 

1907  

1908  

4,  684,  600 
3  ,  100,  ooo 

51,  ooo,  ooo 

22,  7OO,  OOO 

3,470,000 

20,  500,  OOO 

34,  550,  ooo 

INDUSTRIAL  BONDS- 


1807 

1898 

2,  5OO,  OOO 

1800 

25,  ooo,  ooo 

16,  ooo,  ooo 

3,  ooo,  ooo 

26,  ooo,  ooo 

6,  ooo,  ooo 

12,000,  000 

30,  500,  ooo 

4,  ooo,  ooo 

3,  ooo,  ooo 

IO,  OOO,  OOO 

6,  ooo,  ooo 

57,  300,  ooo 

24,397.  500 

17  700,  ooo 

15,  ooo,  oco 

1908  

2,  000,  000 

59,  120,  ooo 

106,  320,  ooo 

o  Only  those  years  are  given  during  which  issues  were  made, 
b  Including  private  banking  firms. 


98l 


APPENDIX  VII. 

THE  DEVELOPMENT  OF  CONCENTRATION  OF  THE  GERMAN 
GREAT  BANKS.1 

I.  BANK  FUR  HANDEX  UND  INDUSTRIE  IN  DARMSTADT. 

[Founded  in  1853.     Capital,  154,000,000  marks.     Surplus.  30,250,000  marks.] 
[To  page  641.] 

Branches  (7). — Frankfort  on-the-Main  since  1864  (agency  as  early  as 
1854);  Berlin  since  1871;  Hannover  since  1900;  Strassburg  since  1901; 
Halle  and  Stettin  (with  deposit  office  Bollwerk)  since  1906;  Leipzig  (with 
deposit  office  Leutzsch)  since  1908. 

Commandites  2  (4). — Riimelin  &  Co.  in  Heilbronn;  Wingenroth,  Scherr 
&  Co.  in  Mannheim;  Schmitz,  Heidelberger  &  Co.  in  Mainz,  Fuld  &  Co., 
Pforzheim. 

Deposit  offices  (51). — Since  1900,  viz,  16  in  Berlin;  2  in  Charlottenburg; 
i  each  in  Halensee,  Gross-Lichterfelde  W.,  Zehlendorf,  Kottbus,  Forst 
(Lausitz),  Frankfort  -  on  -  the  -  Oder,  Greifswald,  Guben,  Lahr  (Baden), 
Offenbach-on-the-Main,  Prenzlau,  Spremberg  (Mark),  Stargard  (Pomer- 
ania). 

Establishments  (Niederlassungeri)  (5). — In  Freiburg -in- the -Breisgau, 
Giessen,  Landau  (Pfalz),  Neustadt  (Haardt),  Quedlinburg. 

Agencies  (7). — In  Alsfeld,  Butzbach,  Herborn,  Pasewalk,  Sangerhausen, 
Senftenberg,  and  Sorau. 

The  Darmstadter  Bank  has  founded  or  participated  in  the  founding  of 
the  following  subsidiary  institutions  (Tochtergesellschaften).3 

1871.  The    Amsterdamsche    Bank    in    Amsterdam    (share    capital 
6,000,000  florins.) 

The  Bank  fur  Handel  und  Industrie  is  represented  on  the 
supervisory  board  by  three  members  of  its  own  managing  board. 
1 88 1.  The  Wiirttembergische  Bankanstalt,  formerly  Pflaum  &  Co., 
in  Stuttgart  (share  capital  10,000,000  marks).  Since  1881  it  has 
had  a  contractual  community  of  interest  with  the  Wiirttem- 
bergische Vereinsbank  in  Stuttgart,  founded  in  1869  (share  capital 
30,000,000  marks;  branches  in  Heilbronn,  Reutlingen,  and  Ulm; 
commandites  in  Ellwangen,  Esslingen,  and  Gerabronn).  The  two 
banks  share  up  to  1930  profits  and  losses  pro  rata  of  their  share 
capital,  L  e.,  in  the  proportion  of  i  to  3.4 

The  Bank  fur  Handel  und  Industrie  is  represented  on  the 
supervisory  board  of  the  Wiirttembergische  Bankanstalt  by  two 
members  of  its  own  managing  board. 

-      982 


The     G  e  r  man     Great     Banks 

1889.  The  Deutsch-Asiatische  Bank  in  Shanghai,  with  12  branches  in 
Berlin,  Hamburg,  Tientsin,  Tsingtau,  Hankow,  Hongkong,  Cal- 
cutta, Tsinanfu,  Peking,  Yokohama,  Kobe  (Japan),  and  Singapore, 
share  capital,  7,500,000  Shanghai  taels,  fully  paid  up  (jointly  with 
other  firms). 

This  bank  has  the  privilege  of  note  issue  by  its  establishments 
situated  within  the  check  districts  of  Kiauchau  and  in  China. 

The  Bank  fur  Handel  und   Industrie  is  represented  on  the 
supervisory  board. 

1894.  The  Banca  Commercial  Italiana  in  Milan  (share  capital 
105,000,000  lire)  jointly  with  other  German,  Austrian,  and  Swiss 
firms. 

Number  of  branches  33  (in  Italy). 

The  Bank  fur  Handel  und   Industrie  is  represented  on  the 
supervisory  board. 

1898.  The  Banque  Internationale  de  Bruxelles  in  Brussels  (share 
capital  25,000,000  francs,  fully  paid  up)  jointly  with  other  German 
and  foreign  firms. 

The  Bank  fur  Handel  und   Industrie  is  represented  on  the 
supervisory  board. 

1900.  The  Bankers'  Trading  Syndicate  in  London  (capital  £100,000). 
1904-5.  The  Banca  Marmorosch  Blank  &  Co.,  Societate  anonima  in 
Bucharest,   formerly  a  commandite  of  the  bank   (share  capital 
10,000,000  lei)  jointly  with  the  Berliner  Handelsgesellschaft. 
1906.  The    Amerika-Bank    Aktien-Gesellschaft    (capital    25,000,000 
marks  in  five  series,  of  which  5,000,000  are  fully  paid  up  and  the 
remaining  20,000,000  marks  to  the  extent  of  25  per  cent).6 
The  Darmstadter  Bank  has  absorbed  the  following  banks  and  banking 
firms: 

1900.  The  banking  firm  Gust.  Maier  &  Co.  in  Frankfort  on-the-Main. 

1901.  The  banking  firm  H.  Oppenheimer  in  Hannover. 
1901.  The  banking  firm  Otto  Davisson  in  Hannover. 

1901.  The  banking  firm  Bernhard  Lillienthal  in  Gustrow. 

1902.  The  Bank  fur  Siiddeutschland  in  Darmstadt  (share  capital 

15.672, 300  marks). 

1902.  The  Berlin  office  of  the  Breslauer  Discontobank. 
1904-5.  The  banking  firm  Robert  Warschauer  &  Co.  in  Berlin. 

1905.  The  banking  firm  Philipp  Nicolaus  Schmidt  in  Frankfort-on- 

the-Main. 

1906.  The  banking  firm  Hermann  Arnold  &  Co.,  banking  comman- 

dite, in  Halle-on-the-Saale. 

1907.  The  banking  firm  Ed.  Loeb  &  Co.  in  Neustadt  a.  d.  H.  and 

Landau. 

1907.  The  banking  firm  Max  Klette  in  Prenzlau. 

Through  stock  ownership  the  Darmstadter  Bank  maintains  communi- 
ties of  interest  with  the  following  institutions: 

i.  Since  1902  with  the  Breslauer  Discontobank  in  Breslau  (share  capital 
25,000,000  marks)  which  has  10  branches  in  Glatz,  Gleiwitz,  Gorlitz,  Kat- 

983 


National    Monetary     Commission 

towitz,  Lauban,  Myslowitz  (Upper  Silesia),  Oppeln,  Ratibor,  Zabrze  (Upper 
Silesia),  and  Ziegenhals.     This  bank  also  has: 
Three  deposit  offices  in  Breslau. 
One  agency  in  Habelschwerdt. 
It  absorbed  the  following  firms  and  banks: 
1888.  Perls  &  Co.  in  Gleiwitz. 
1900.  Landsberger  &  Co.  in  Kattowitz. 
1905.  L.  Silberberg  in  Myslowitz. 
1905.  L.  Reymann  in  Oppeln. 

1905.  The  Zabrzer  Discontobank  Kochmann  &  Co.  in  Zabrze. 
1908.  The  banking  firm  Karl  Schubert  Nachf.  in  Gorlitz. 
Two  members  of  the  managing  board  of  the  Bank  fur  Handel  und  Indus- 
trie have  seats  on  the  supervisory  board  of  this  bank. 

2.  Since  1902  with  the  Ostbank  fur  Handel  und  Gewerbe  in  Posen  (share 
capital  18,000,000  marks),  which  has  9  branches,  viz,  in  Allenstein,  Brom- 
berg,  Danzig,  Graudenz,  Konigsberg,  Landsberg  a.  d.  W.,  Memel,  Stolp 
i.  P.,  and  Tilsit). 

One  commandite,  viz,  R.  Damme  in  Danzig. 

Two  agencies,  viz,  in  Culm  (Western  Prussia)  and  Schwerin  a.  W. 

Twenty-two  deposit  offices,  viz,  in  Braunsberg,  Danzig,  Gnesen,  Hohen- 
salza,  Insterburg,  Kaukehmenin  Eastern  Prussia,  Konigsberg  in  Prussia  (2), 
Konitz,  Krotoschin,  Lissa  in  Prussia,  Lyck  in  Eastern  Prussia,  Marienburg, 
Marienwerder,  Osterode,  Posen  (3),  Rastenburg,  Rawitsch,  and  Schneide- 
miihl. 

One  exchange  office  (Wechselstube)  in  Neu-Skalmierschiitz. 

It  absorbed  the  following  banking  firms  and  banks: 

1898.  The  banking  firm  Heimann  Saul  in  Posen. 

1899.  The  banking  firm  C.  W.  Quilitz  in  Landsberg  a.  d.  W. 

1905.  The    banking    firm    Ostdeutsche    Bank,    formerly  J.   Simon 

Wwe.  &  Sohne  in  Konigsberg  (share  capital  10,000,000 
marks)  which  in  turn  had  absorbed  the  banking  firms  J. 
Simon  Wwe.  &  Sohne  in  Konigsberg  in  Prussia,  and  M. 
Friedlander  in  Bromberg,  and  had  two  branches,  one  in 
Tilsit  and  one  in  Danzig. 

1906.  The    Bromberger    Bank    fur    Handel    und    Gewerbe    (capital 

2,000,000  marks),  founded  by  the  Ostdeutsche  Bank  The 
former  took  over  the  Bromberg  branch  of  the  Ostdeutsche 
Bank  and  absorbed  the  following  firms: 

1901.  Franz  Lietz  in  Inowrazlaw. 

1908.  Hermann  Kiister  in  Stolp  i.  P. 

3.  Since  1903  with  the  Deutsche  Nationalbank,  stock  company  en  com- 
mandite (formerly  the  N ordivestdeutsche  Bank,  stock  company  en  comman- 
dite, in  Bremen).     Share  capital,  33,000,000  marks.     This  bank  has — 

Eight  branches,  viz,  in  Bremen,  Bremerhaven,  Dortmund,  Lehe,  Minden, 
Mulheim-on-the-Ruhr,  Oldenburg,  and  Osnabriick. 


984 


The     German     Great     Banks 

Eleven  deposit  offices,  viz,  in  Bremen-Neustadt,  Blumenthal  in  Han- 
nover, Cloppenburg,  Delmenhorst,  Hohenkirchen,  Jever,  Liibbecke,  Norden- 
ham,  Rinteln,  Vechta,  and  Vegesack. 

It  absorbed  the  following  banking  houses  and  banks: 
1901.  Georg  C.  Mecke  &  Co.  in  Bremen. 

1905.  The  Vegesacker  Bank  Schild  &  Co.  in  Vegesack,  near  Bremen, 
with  branch  in  Blumenthal  (Hanover). 

1905.  The  Oldenburger  Bank  (share  capital  2,000,000  marks)  with 

6  branches  in   Atens-Nordenham,- Cloppenburg,   Delmen- 
horst, Hohenkirchen,  Jever,  and  Vechta. 

1906.  The    Deutsche    Nationalbank    in    Bremen    (share    capital 

1,500,000  marks).6 

1906.  The  Mindener  Bankverein  (share  capital  4,500,000  marks), 
with  2  branches  in  Liibbecke  and  Rinteln. 

1906.  The  Leher  Bankverein  Bischoff  &  Co.  in  Lehe. 
1908.  Gerh.  Miihlenbeck  in  Mulheim-on-the-Ruhr. 

4.  Since  1905  with  the  Bayerische  Bank  fur  Handel  und  Industrie  (for- 
merly Bayerische  Bank}  in  Munich  (share  capital  8,000,000  marks).7 
This  bank  has — 

Four  branches,  viz,  in  Bamberg,  Fiirth,  Nuremberg,  and  Wiirzburg. 
One  exchange  office  (Wechselstube)  in  Nuremberg. 
The  bank  has  absorbed  the  following  houses: 

1905.  The  banking  firm  Gutleben  &  Weidert  in  Munich. 

1907.  The  banking  firm  Erdmann  &  Frankenau  in  Nuremberg.- 

1908.  The  banking  firm  Gerh.  Miihlenbeck  in  Mulheim-on-the-Ruhr. 
The  Darmstadter  Bank  is  represented  by  three  members  of  its  managing 

board  on  the  supervisory  board  of  the  Bayerische  Bank  fur  Handel  und 
Industrie. 

Since  1904  the  Bank  fur  Handel  und  Industrie  has  maintained  contrac- 
tual business  connections  with  the  Vereinsbank  in  Wismar,  which  took 
over  the  former  deposit  office  of  the  Bank  fur  Handel  und  Industrie  in 
Rostock  (share  capital  1,500,000  marks,  with  59  agencies  in  Mecklenburg); 
likewise  since  1902  with  the  Wechselstuben-Aktiengesellschaft  Merkur  in 
Vienna  (share  capital  in  1908,  20,000,000  kronen,  with  9  branches),  which 
took  over  the  clientele  of  the  former  commandite  of  the  bank  (Dutschka  & 
Co.).  The  former  is  represented  on  the  supervisory  board  of  the  Vienna 
institution  by  two  members  of  its  managing  board. 

II.  BERLINER  HANDELSGESELLSCHAFT,  BERLIN. 

[Founded  in  1856.] 

Capital  en  commandite,  110,000,000  marks. 

Surplus  (in  round  figures),  34,500,000  marks,  equal  to  31.63  per  cent  of 
the  share  capital. 
Branches. — None. 
Commandites. — None. 
Deposit  offices. — None. 

985 


National    Monetary     Gommissio 


n 


Has  absorbed — 

1901.  The  banking  firm  Breest  &  Gelpcke  in  Berlin,  which  in  1891 

had  taken  over  the  Internationale  Bank  (capital  40,000,000 

marks). 

Participated  in  the  founding  of  the  following  subsidiary 

companies  (Tochtergesellschaften)  :8 
1872.  The    Schweizerischer    Bankverein    in    Basle    (share    capital 

50,000,000  francs). 
1889.  The  Deutsch-Asiatische  Bank. 
1894.  The  Banca  Commerciale  Italiana  in  Milan. 
1898.  The  Banque  Internationale  de  Bruxelles,  Brussels. 
1904-5.  The  Banca  Marmorosch  Blank  &  Co.,  Societate  anonima 

in    Bucharest    (jointly   with    the    Bank   fur    Handel   und 

Industrie). 

III.  COMMERZ-  UNO  DISCONTO-BANK  IN  HAMBURG. 

[Founded  in  1870.] 

Share  capital,  85,000,000  marks. 
Surplus,  12,801,555  marks. 

Branches. — Three,  viz,  in  Berlin,  Hannover,  and  Kiel. 
Deposit  offices. — Fifty -four,  viz,  10  in  Hamburg,  i  each  in  Wandsbeck 
and  Altona-Ottensen,  29  in  Berlin,  2  each  in  Charlottenburg  and  Schone- 
berg,   i  each  in  Wilmersdorf,  Friedenau,  Rixdorf,  Weissensee,  Halensee, 
Neumiinster,  Potsdam,  Spandau,  and  Eberswalde. 

Commandites. — Two,  viz,  J.  Drey  fuss  &  Co.  in  Frankfort  on-the-Main, 
S.  Kaufmann  &  Co.  in  Berlin. 

The  Commerz-  und  Disconto-Bank  has  absorbed  the  following  institutions: 
1904-5.  The   Berliner  Bank   in   Berlin    (share    capital    42,000,000 
marks). 

This  bank  had  14  deposit  offices,  viz,  Berlin,  9;  Char- 
lottenburg, i,  Schoneberg,  i;  Spandau,  i;  Eberswalde, 
i ;  Neustrelitz,  i  — Commandites,  i  (S.  Kaufmann  &  Co. 
in  Berlin). 

It  had  absorbed — 

1889.  The  Berliner  Handelsbank,  E--  G.  in  Berlin. 
1889.  The  banking  firm  A.  Russ  jun.  in  Berlin. 
1907.  The  banking  firm  B.  Magnus  in  Hanover. 
The  Commerz-  und  Disconto-Bank  founded  as  its  sub- 
sidiary company  (Tochtergesellschaft) : 

1905.  Jointly  with  the  Disconto-Gesellschaft,  the 
Revisions-  und  Vermogensverwaltungs- 
Aktiengesellschaft,  Berlin  (share  capital 
1,000,000  marks),  with  4  branches  in 
Hamburg,  Hof,  Leipzig,  and  Munich. 


986 


The     German     Great     Banks 

Since  1872  it  maintains  a  community  of  interest9  through  share  owner- 
ship (19,302  shares,  at  £10  paid  in,  £193,020)  with  the  London  and  Han- 
seatic  Bank,  Ltd.,  in  London  (total  capital  is  made  up  of  40,000  shares). 

Since  1904  it  has  maintained  friendly  relations  with  the  Kredit-  und 
Sparbank  in  Leipzig  (share  capital  10,350,000  marks)  which  had  ab- 
sorbed— 

1888.  The  Kredit-  und  Sparbankverein  in  Leipzig. 

1897.  The  banking  firm  Franz  H.  Moschlers  Sohne  in  Altenburg 
and  had  a  commandite  interest  in  the  banking  firm  Schirmer 
&  Schlick  (in  liquidation)  in  Leipzig. 

IV.  DEUTSCHE  BANK  IN  BERLIN. 

[Pounded  in  1870.] 

Share  capital,  200,000,000  marks. 

Surplus  (in  round  figures),  102,000,000  marks. 

Branches. — Nine,  viz,  Bremen  since  1871;  Hamburg,  since  1872;  London, 
since  1873;  Frankfort  on-the-Main,  since  1886,  when  the  Deutsche  Bank 
took  over  the  assets  and  liabilities  of  the  Frankfurter  Bankuerein;  Munich, 
since  iSSg;10  Leipzig  and  Dresden,  since  1900;  Nuremberg,  since  1905; 
and  Constantinople,  since  1909. 

Commandites. — Two,  viz,  Rosenfeld  &  Co.,  Vienna,  and,  since  1905,  G.  E. 
Heydemann  in  Bautzen  with  branches  in  Lobau  and  Zittau. n 

Deposit  offices,  Seventy-seven,  viz,  Berlin,  27;  Charlottenburg,  6; 
Schoneberg,  2 ;  Rixdorf ,  i ;  Steglitz,  i ;  Wilmersdorf ,  2 ;  i  each  in  Friede- 
nau,  Weissensee,  Spandau,  Wiesbaden,  Deuben,  Meissen,  and  Augsburg; 
Hamburg,  14;  Leipzig,  7;  Dresden,  9;  Munich,  i. 

The  Deutsche  Bank  founded  or  took  part  in  the  founding  of  the  follow- 
ing subsidiary  companies  (Tochtergesellschaf ten) : 12 

1889.  The  Deutsch-Asiatische  Bank   (jointly  with  other  domestic 

and  foreign  concerns).     (See  above,  p.  983.) 

1890.  The  Deutsche  Treuhand-Gesellschaft  in  Berlin  (share  capital, 

1,500,000  marks)    (former  firm    name:  Deutsch-Amerika- 
nische  Treuhand-Gesellschaft). 

1890.  The  Deutsche  Ueberseeische  Bank  in  Berlin,  which  took  the 
place  of  the  Deutsche  Ueberseebank,  founded  in  1886  (share 
capital  20,000,000  marks.)  (See  above,  p.  433,  sub  a.) 

Twenty-two  branches,  viz,  in  Santiago  de  Chile,  Val- 
paraiso, Antofagasta,  Concepcion,  Iquique,  Temuco,  Val- 
divia,  Osorno,  and  Puerto  Montt,  in  Chile;  Buenos  Aires, 
Bahia  Blanca,  Cordoba,  and  Tucuman,  in  Argentina;  Mexico 
City;  Lima,  Callao,  Trujillo,  and  Arequipa,  in  Peru;  La 
Paz  and  Oruro,  in  Bolivia;  Montevideo,  in  Uruguay;  Madrid 
and  Barcelona,  in  Spain;  Guayaquil,  in  Ecuador. 

1894.  The  Banca  Commerciale  Italiana  in  Milan  (jointly  with  other 
domestic  and  foreign  concerns).     (See  above,  p.  983.) 
Thirty-three  branches  in  Italy. 

987 


National    Monetary     Commission 


1904-5.  The  Aktiengesellschaft  fur  uberseeische  Bauunternehmungen, 
Berlin,  which  operated  until  1906  under  the  firm  name  of 
the  Deutsch-Ostafrikanische  Bank  (jointly  with  nine  other 
German  firms,  including  the  Deutsch-Ostafrikanische 
Handelsgesellschaft);  share  capital,  2,000,000  marks. 
(See  above,  p.  438,  sub  /.) 

1905.  The  Zentralamerika-Bank,  Aktiengesellschaft  in  Berlin  (jointly 

with  the  Deutsche  Uberseeische  Bank,  the  banking  house 
Lazard  Speyer-EHissen  in  Frankfort-on-the-Main,  and  the 
Schweizerische  Kreditanstalt}.  Share  capital,  10,000,000 
marks,  of  which  for  the  time  being  25  per  cent  has  been 
paid  in. 

1906.  The  Mexikanische  Bank  fur  Handel  und  Industrie  (Banco  Mexi- 

cano  de  Comercio  £  Industria)  in  Mexico  (jointly  with  the 
banking  house  Speyer  &  Co.  in  New  York) ;  share  capital, 
16,000,000  pesos;  the  bank  took  over  the  business  of  the 
Banco- Aleman  Transatlantic©  in  Mexico;  the  concession 
runs  for  forty  years  beginning  with  March  19,  1897.  (See 
above,  p.  439,  sub  m.) 

The  Deutsche  Bank  has  absorbed  the  following  banks  and  private  bank- 
ing firms:13 

1886.  Frankfurter  Bankverein. 

1901.  Menz,  Blochmann  &  Co.,  Dresden. 

1905.  H.  Chr.  Schmidt,  Hamburg. 

1906.  Buhler  &  Heymann,  Munich  and  Augsburg. 

Through  stock  ownership,  the  Deutsche  Bank  has  communities  of  inter- 
est with  the  following  banks  u  (for  which  the  date  of  affiliation  and  share 

capital  are  shown) : 

Share  capital 
(marks). 

1897.  (i)  Bergische  Markische  Bank,  Elberfeld 75,  ooo,  ooo 

(2)  Schlesischer  Bankverein,  Breslau 30,  ooo,  ooo 

(3)  Hannoversche  Bank,  Hanover 22,  500,  ooo 

1898.  (4)  Oberrheinische  Bank,  Mannheim 20,  ooo,  ooo 

1902.  (5)  Duisburg-Ruhrorterbank,  Duisburg 12,  ooo,  ooo 

1903.  (6)  Essener  Kreditanstalt,  Essen-on-the-Ruhr. .   60,000,000 

1904.  (7)  Siegener  Bank  fur  Handel  und  Gewerbe,  Sie- 

gen  i.  W 4,  ooo,  ooo 

(8)  Sachsische  Bank,  Dresden 30,  ooo,  ooo 

(9)  Essener  Bankverein,  Essen-on-the-Ruhr.  . .    15,000,000 
(10)  Oldenburgische  Spar-  und  Leihbank,  Olden- 
burg       4,  ooo,  ooo 

(i  i)  Privatbank  zu  Gotha 10,  ooo,  ooo 

1905.  (12)  Deutsch-Ostafrikanische  Bank,  Berlin,  with 

a  branch  in  Dar-es-Salam 2,  ooo,  ooo 


988 


The     German     Great     Banks 


(1)  Bergisch-Markische   Bank,  share  capital  75,000,000  marks,  has  17 
branches,  viz,  Aix-la-Chapelle,  Barmen,  Bocholt,  Bonn,  Coblenz,  Diissel- 
dorf  (in  combination  with  a  deposit  office),  Duisburg,  Hagen,  Cologne,  Kre- 
feld,  Maria-Gladbach,  Paderborn,  Remscheid,  Rheydt,  Solingen,  St.  Johann- 
Saarbriicken,  Trier ;  8  deposit  offices,  viz,  Bad  Neuenahr,  Bernkastel,  Cues, 
Cronenberg,  Diisseldorf-Wehrhahn,  Goch,  Hilden,  Schwelm,    Warburg;  3 
commandites,  viz,  Hiiser  &  Co.,  in  Solingen;  Max  Gerson  &  Co.,  Ltd.,  in 
Hamm  and  Soest;  D.  Fleck  &  Scheuer,  in  Diisseldorf. 

It  has  absorbed  the  following  banks  and  private  bankers: 

1895.  R.  Jacobi,  Cologne;  J.  H.  Brink  &  Co.,  Elberfeld;  Salomon 

Philipp,  Ruhrort. 
1898.  The  Rernscheider  Bank,  Ruhrort   (capital  stock,   2,000,000 

marks);  Hiiser  &  Co.,  Solingen. 

1901.  A.  &  C.  Sohmann,  Krefeld;  Goldschmidt  &  Co.,  Bonn.     In 

the  same  year  the  Bergisch-Markische  Bank  undertook 
the  liquidation  of  the  firms  Beckerath  &  Heilmann  in 
Krefeld  and  Rob.  Suermondt  &  Co.  in  Aix-la-Chapelle. 

1902.  Barmer  Handelsbank,  Barmen. 

1904.  Paderstein'scher  Bankverein,  Paderborn  und  Warburg 
(share  capital,  5,000,000  marks);  Lazard,  Brach  &  Co. 
(Kommanditgesellschaft)  in  St.  Johann-Saarbriicken ; 
Trierer  Bank,  Trier  (share  capital,  2,000,000  marks);  A. 
Molenaar  &  Co.  (Kommanditgesellschaft  auf  Aktien, 
Krefeld  (share  capital,  1,260,000  marks);  this  bank  dele- 
gates two  of  its  officers  to  serve  on  the  supervisory  board 
of  the  Deutsche  Bank,  and  the  Deutsche  Bank  in  turn 
delegates  two  of  its  officers  to  serve  on  the  board  of  A. 
Molenaar  &  Co. 

(2)  The  Schlesischer  Bankverein  of  Breslau  (capital  stock,  30,000,000 
marks)  has  13  branches,  located  as  follows:  Beuthen  (in  Silesia),  Glatz, 
Gleiwitz,    Glogau,    Gorlitz,    Hirschberg    (in   Silesia),    Konigshutte,    Leob- 
schiitz,   Liegnitz,    Neisse,    Rybnik  (in  Upper  Silesia),  and   Sprottau  and 
Waldenburg  (in  Lower  Silesia).     Two  deposit  offices,  both  in  Breslau,  and 
three  commandites,  Georg  Fromberg  &  Co.,  Berlin,  Richard  Vogt  &  Co., 
Frankenstein  (Silesia),  and  Hugo  Scherzer  (Schweidnitz) .     It  absorbed  in 
1905  the  Hirschberg  branch  of  the  banking  house  Abraham  Schlesinger, 
and  in  1906  the  banking  firm  Gebriider  Herzberg,  Breslau. 

At  the  close  of  1905  it  established  friendly  relations  with  the  Ober- 
schlesischer  Credit- Verein  of  Ratibor,  and  the  Niederlausitzer  Kredit-  und 
Sparbank  at  Kottbus.  It  has  a  branch  in  Guben  and  an  agency  in  Weiss- 
wasser  O.-L.  The  latter  has  absorbed  the  banking  house  of  Wilhelm 
Wilke  in  Guben,  and  earlier  the  Kattowitzer  Bankverein.  The  Schlesischer 
Bankverein  is  represented  on  the  supervisory  board  of  the  Deutsche  Bank 
by  a  member  of  its  own  executive  board.  The  Deutsche  Bank  delegates 


989 


National    Monetary     Commission 


two  of  its  executive  officers  to  the  supervisory  board  of  the  Schlesischer 
Bankverein. 

(3)  The  Hannoversche  Bank,  Hanover  (capital  stock,  22,500,000  marks), 
has  5  branches,  located  as  follows:  Celle,  Hameln,  Harburg  a.  E.,  Liineburg, 
and  Verden;  2  deposit  offices — one  at  Linden  and  the  other  in  Stade.     Com- 
mandites,  none.15 

The  Hannoversche  Bank  absorbed  in  1906  the  banking  firm  of  A.  Leh- 
mann  in  Verden.  Jointly  with  the  Hildesheimer  Bank  and  the  Osnabriicker 
Bank  it  established  a  subsidiary,  the  Braunschweiger  Privatbank,  A.-G., 
with  an  authorized  capital  stock  of  6,000,000  marks,  of  which  3,000,000 
is  paid  in.  This  was  formerly  the  banking  firm  of  Ludwig  Peters  Nach- 
folger  of  Brunswick,  commandite  of  the  Hildesheimer  Bank,  and  was 
transformed  in  1905  under  its  present  name. 

Through  stock  ownership  it  has  communities  of  interest  with  the  (a) 
Osnabriicker  Bank  and  (6)  the  Hildesheimer  Bank. 

(a)  The  Osnabriicker  Bank,  in  Osnabriick  (share  capital  14,500,000 
marks),  which  has  also  founded  the  Quakenbriicker  Bank,  has  1 1  branches, 
located  as  follows:  Aurich,  Emden,  Esens,  Herford,  Leer,  Lingen,  Meppen, 
Miinster,  Norden,  Salzuflen,  Weener.  It  has  13  agencies  and  has  absorbed 
the  following: 

1905.  The  Ostfriesische  Bank,  in  Leer  and  Weener;  capital  stock, 

.3,000,000  marks.  This  institution  has  been  retained  as  a 
branch  bank  of  the  Osnabriicker  Bank  under  its  former  name 
and  in  1907  absorbed  the  banking  firm  of  R.  Van  Hoorn,  of 
Leer  in  Ostfriesland. 

Marcus  D.  Ganz,  a  banking  firm  in  Herford  which  has  been 

continued  as  a  branch  of  the  Osnabriicker  Bank  under  the 
name  of  the  Herforder  Bank. 

1906.  Harlingerlandische   Bank   Eyben,  Bode  &   Jansen,  in  Esens 

(Ostfriesland). 

1907.  The  Emder  Bank,  Emden  (with  a  branch  in  Weener);  capital 

stock,   1,000,350  marks.     Carl  Krecke,  in  Salzuflen. 

1908.  The   Volksbank    Arenberg-Meppen    and    the    banking   firm 

Langschmidt  &  Sohn,  Lingen. 

(6)  The  Hildesheimer  Bank,  in  Hildesheim  (capital  stock,  8,000,000 
marks),  has  two  branches  (one  in  Gottingen  and  one  in  Goslar),  two  deposit 
offices  (Harzburg,  Langspringe),  and  3  commandites,  Joseph  Kayser  &  Co. 
in  Einbeck,  M.  Falck  in  Einbeck,  and  M.  Katz  in  Duderstadt  It  has  ab- 
sorbed the  following: 

1886.  M.  Davidsohn,  Hildesheim. 
1886.  Schiff  &  Traube,  Hildesheim. 
1905.  Benfey  &  Co.,  Gottingen. 

The  Deutsche  Bank  is  represented  on  the  supervisory  board  of  the 
Hannoversche  Bank. 

(4)  The  Oberrheinische  Bank   (formerly  Koster  &  Co.)   in  Mannheim 
which  was  merged  in   1904  with  the  Rheinische  Kreditbank.     It  had  9 


990 


T h  e     German     Great     Banks 

branches,  located  as  follows:  Heidelberg,  Karlsruhe,  Freiburg  i.  B., 
Rastatt,  Bruchsal,  Baden-Baden,  Strassburg  i.  E.,  Miilhausen  i.  E.,  Basle. 
It  had  a  deposit  office  in  Ludwigshaf  en ;  2  commandites,  in  Baden-Baden 
and  Rastatt,  and  had  absorbed  the  following  banking  firms: 

1883.  Koster  &  Co.,  Mannheim. 

1896.  C.  Schwarzmann,  Strassburg. 

1898.  Christian  Mez,  Freiburg;  R.  Nicolai  &  Co.,  Baden-Baden  and 
Rastatt;  F.  S.  Meyer,  Baden-Baden. 

1903.  Ed.  Koelle,  Karlsruhe. 

Through  ownership  of  stock  the  Oberrheinische  Bank  and  the  Deutsche 
Bank  had  a  community  of  interest  with  the  Suddeutsche  Bank,  in  Mannheim. 

(5)  The    Duisburg-Ruhrorter    Bank,     in    Duisburg10     (capital    stock, 
12,000,000  marks)  has  4  branches.     In  Diisseldorf  it  had  a  branch  since 
1897   under  the  name  of    the  Niederrheinische  Bank,  Zweiganstalt  der 
Duisburg-Ruhrorter  Bank.     The  other  branch  was  established  by  taking 
over  the  Homberger  Volksbank,  with  offices  in  Oberhausen  and  Ruhrort. 

(6)  The  Essener    Kreditanstalt    in    Essen-on-the-Ruhr    (capital   stock, 
60,000,000  marks)  has  16  branches,  located  as  follows:  Bocholt,  Bochurn, 
Dortmund,  Duisburg,  Duisburg-Ruhrort,  Gelsenkirchen,  Iserlohn,  Miilheim 
(Ruhr),  Miinster  i.  W.,  Oberhausen,  Recklinghausen,  and  Wesel.     Eight 
agencies,  as  follows:  Altenessen,  Dorsten,  Hamborn,  Herne  i.  W.,  Homberg, 
Schalke,    Witten,    Wanne.      Three   commandites,  viz,    Ernst   Osthaus  in 
Hagen,  C.  Basse  in  Ludenscheid,  and  J.  A.  Rolling  in  Buer. 

It  has  absorbed  the  following: 

1895.  Levi  Hirschland,  Essen. 

1902.  Kreditbank,  Recklinghausen. 

1903.  S.  Hanf,  Witten. 

1905.  The  Iserlohner  Volksbank  (capital  stock,  1,000,000  marks). 

1905.  Poppe  &  Schmoelder,  Wesel. 

1906.  The    Westfalischer    Bankverein    (capital    stock,     8,000,000 

marks),  Miinster  (with  a  branch  in  Bocholt). 

1908.  Albert  Heinrich  Rost,  Miinster. 

1909.  The  Duisburg-Ruhrorter  Bank,  Duisburg. 

(7)  The  Siegener  Bank  fur  Handel  und  Gewerbe  in  Siegen  i.  W.  (capital 
stock,  4,000,000  marks).     The  Deutsche  Bank  is  represented  on  its  super- 
visory board. 

(8)  The  Sachsische  Bank,  Dresden  (capital  stock,  30,000,000  marks), 
has  8  branches,  located  as  follows:  Annaberg,  Chemnitz,  Leipzig,  Meerane, 
Plauen  i.  V.,  Reichenbach  i.  V.,  Zittau,  and  Zwickau. 

(9)  The    Essener   Bankverein    of   Essen-on-the-Ruhr    (capital   stock 
15,000,000  marks),  grew  out  in  1899  of  the  banking  firm  Rebling  &  Rehn. 
It  has  3  branches,  viz,  Borbeck,  Bottrop  i.  W.,  and  Oberhausen;  2  deposit 
offices  (Altenessen  and  Essen-Riittenscheid),  and  i  commandite,  the  bank- 
ing house  Ferdinand  Klostermann  in  Hattingen. 

The   Deutsche  Bank  is  represented  on  the  supervisory  board  of  the 
Essener  Bankverein. 


991 


National    Monetary     Commission 

(10)  The  Oldenburgische  Spar-  und  Leihbank17  in  Oldenburg  (capital 
stock,  4,000,000  marks)  has  6  branches,  viz,  Brake,  Delmenhorst,  Jever, 
Lohne,  Nordenham,  Varel,  Wilhelmshaven,  and  i  deposit  office  at 
Ovelgonne. 

(n)  The  Privatbank  zu  Gotha  (capital  stock,  10,000,000  marks)  has  3 
branches — Erfurt,  Leipzig,  and  Weimar.  The  Deutsche  Bank  is  repre- 
sented on  its  supervisory  board. 

(12)  The  Deutsch-Ostafrikanische  Bank  in  Berlin  has  a  branch  in 
Dar-es-Salam. 

The  Deutsche  Bank  is  united  with  (a)  the  Mecklenburgische  Hypotheken- 
und  Wechselbank  and  (6)  the  Rheinische  Kreditbank  in  a  community  of 
interest,  based  on  agreements  and  exchange  of  representatives  on  the 
supervisory  boards. 

(a)  Since  1897  it  has  been  allied  with  the  Mecklenburgische  Hypotheken- 
und  Wechselbank  in  Schwerin18  (capital  stock,  9,000,000  marks).  This 
institution  has  a  branch  in  Giistrow  and  63  agencies  (62  in  Mecklenburg 
and  i  in  Ratzeburg).  Through  ownership  of  stock  it  has  a  community  of 
interest  with  the  Mecklenburgische  Sparbank  (capital  stock,  3,000,000 
marks),  with  a  branch  in  Rostock,  an  office  in  Schoneberg,  and  79  agencies 
in  Mecklenburg.  The  Deutsche  Bank  has,  moreover,  a  direct  interest  in 
the  Mecklenburgische  Sparbank.  The  latter  has  an  interest  in  the  Meck- 
lenburgische Treuhandgesellschaft  m.  b.  H.  in  Schwerin. 

The  Mecklenburgische  Hypotheken-  und  Wechselbank  delegates  one  of 
its  officers  to  represent  it  on  the  supervisory  board  of  the  Deutsche  Bank, 
and  the  latter  delegates  one  of  its  executive  officers  to  serve  on  the  board 
of  the  Mecklenburgische  Hypotheken-  und  Wechselbank. 

(6)  The  community  of  interest  with  the  Rheinische  Kreditbank  in  Mann- 
heim (capital  stock,  75,000,800  marks)  dates  from  1904.  This  bank  has 
13  branches,  located  as  follows:  Baden-Baden,  Freiburg  i.  B.,  Heidelberg, 
Kaiserslautern,  Karlsruhe,  Konstanz,  Lahr  i.  B.,  Miihlhausen  i.  K.,  Offen- 
burg,  Pforzheim,  Speyer,  Strassburg  i.  E-,  and  Zweibrucken.  It  has  3 
deposit  offices  ( i  in  Bruchsal  and  2  in  Mannheim).  Since  the  absorption  of 
the  Oberrheinische  Bank  it  has  two  agencies — i  in  Neunkirchen  (district 
of  Trier)  and  i  in  Rastatt;  2  commandites:  G.  F.  Grohe-Henrich  &  Co. 
in  Saarbriicken  and  B.  Burger  &  Co.  in  Wolfach. 

It  has  absorbed  the  following  banks  and  banking  firms: 
1871.  Joseph  Sautier,  Freiburg  i.  B. 

1874.  Pfalzer  Bankverein,  Mannheim;  Gebriider  Zimmermann, 
Heidelberg. 

1897.  G.  Miiller  &  Kons.,  Karlsruhe  and  Baden-Baden,  Franz  Funck 

(formerly  Gebriider  Wolff),  Baden-Baden. 

1898.  The  Kaiserslauterer  Bank,  formerly  Bocking,  Karcher  &  Co. 

1899.  The  Ortenauer  Kreditbank,  Offenburg. 

1899.  Kaufmann,  Engelhorn  &  Co.,  bank  commandite,  Strassburg 
i.  E. ;  Ed.  Strohmeyer,  Baden-Baden;  the  Lahrer  Kredit- 
bank, Karl  Bader  &  Co. 


992 


The     German     G  r  e  £**•   Ban 


1901.  The  Mannheimer  Bank,  A.-G.  (capital  stock,.  ms: 

1903.  Gebriider  Kapferer,  Freiburg  i.  B. 

1904.  The  Kredit-  und  Depositenbank,  Zweibriicken  (capital  hiv.1" 

4,000,000  marks). 

1905.  The  Oberrheinische  Bank  (capital  stock,  20,000,000  marks). 

with  its  branches,  deposit  office,  commandites,  and  commit 
nities  of  interest  as  given  on  page  990,  No.  4. 

1906.  A.  Sulzberger,  Konstanz;  Julius  Kahn  &  Co.,  Pforzheim  (for- 

merly the  commandite  of  the  Wiirttembergische  Vereins- 
bank). 

1907.  The  Gewerbebank,  Speyer. 

Through  stock  ownership  the  Rheinische  Kreditbank  has  been  united  in 
a  community  of  interest  since  1901,  with  the  newly  organized  Mannheimer 
Bank  (capital  stock,  1,000,000  marks)  and  since  1904  with  the  Suddeutsche 
Bank  in  Mannheim  (capital  stock,  10,000,000  marks),  with  a  branch  in 
Worms.  This  community  of  interest,  however,  it  shares  with  the  Deutsche 
Bank,  both  banks  being  represented  on  the  supervisory  board  of  the  Sud- 
deutsche Bank. 

The  Rheinische  Kreditbank  elects  two  of  its  officers  to  serve  on  the  super- 
visory board  of  the  Deutsche  Bank,  and  the  latter  delegates  two  members 
of  its  executive  staff  to  serve  on  the  supervisory  board  of  the  Rheinische 
Kreditbank. 

Finally  the  Deutsche  Bank  maintains  friendly  relations  with  the  follow- 
ing institutions : 

(a)  The  Anhalt-Dessauische  Landesbank,  of  Dessau.     This  bank  has  6 
branches,  located  as  follows:  Ballenstedt,  Finsterwalde,  Kothen,  Torgau, 
Wittenberg,   Zerbst,    and    6    deposit    offices   (Coswig,    Dahme,    Jessnitz, 
Kirchhain  N.-L.,  Raguhn,  and  Rosslau  in  Anhalt).     It  has  abandoned  its 
Berlin  branch.     In  1908  it  took  over  the  Raguhner  Gewerbebank,  and  the 
deposit  office  in  Jessnitz  of  the  banking  firm  Paul  Schauseil  &  Co.  of  Halle. 

(b)  The  Braunschweiger  Privatbank,  of  Brunswick.     It  has  deposit  offices 
in  Wolfenbiittel  and  in  Braunschweig  (the  latter  took  the  place  of  the  bank- 
ing house  Louis  Bremer  &  Co.,  of  Brunswick,  absorbed  by  the  Braunschweiger 
Privatbank  in  1909). 

(c)  The  Braunsckweigische  Bank  und  Kreditanstalt,  of  Brunswick.     It  has 
3   deposit  offices,   viz,   Goslar,    Blankenburg,   and    Oschersleben,   and    8 
commandites. 

It  absorbed  in  1908  the  Blankenburger  Bank  and  the  banking  firm  C. 
Uhl  &  Co.  in  Brunswick,  and  in  1909  the  firm  F.  Heine,  of  Oschersleben, 
transforming  the  latter  into  a  deposit  office. 

(d)  The  Chemnitzer  Bankverein,  of  Chemnitz,  with  its  branches  and  3 
agencies. 

(e)  The    Danziger  Privat-Aktienbank    in   Danzig,   with   3    branches,  6 
deposit  offices,  7  agencies,  and  2  commandites. 

In  1900  it  absorbed  the  banking  firm  Ernst  Poschmann  in  Danzig. 


90311°— ii 64  993 


National  Mon  et ary     Commission 


(10)  The  Oldesche  Kreditanstalt  in  Konigsberg  (Prussia);  capital  stock, 

stock,  4,ooo,Qs:     It  has  a  branch  in  Danzig  (which  has  deposit  offices  in 

Ivoh.O£}  Dliva,  and  Zoppot),  Posen  (with  deposit  office),  and  Stettin 
ywith  deposit  office);  deposit  offices  in  Konigsberg,  Briesen  i.  W.,  Elbing, 
Insterburg,  Thorn,  Culmsee,  Gumbinnen,  Kolberg,  and  Tiegenhof,  besides  a 
number  of  agencies. 

(g)  The  Magdeburger  Privatbank,  Magdeburg  (for  details,  see  p.  630). 

(A)  The  Bayerische  Handelsbank,  Munich  (for  details,  see  p.  632). 

(i)  The  Bayerische  Vereinsbank,  Munich  (for  details,  see  p.  632). 

(;')  The  Commerzbank,  Lubeck. 

(k)  The  Lubecker  Privatbank,  Liibeck. 

(/)  The  Deutsche  Vereinsbank,  Frankfort-on-the-Main.  This  bank  ab- 
sorbed in  1908  the  firm  Gebriider  Schuster,  of  the  same  city. 

V.    THE    DlSCONTO-GESELLSCHAFT. 

(Direktion  der  Disconto-Gesellschaft,  Berlin.) 
[Founded  1851  (present  organization  since  1856).] 

Share  capital,  170,000,000  marks. 

Surplus,  57,592,611  marks,  equal  to  33.88  per  cent  of  its  share  capital. 
Branches. — Four,  located  as  follows:  London,  1900;     Frankfort-on-the- 
Main,  1901;    Bremen,  1903;    and  Mainz,  1909. 

Commandites. — One,  Ernesto  Tornquist  &  Co.,  Buenos  Ayres,  since  1889. 
Deposit  offices  (dating  from  1895}. — Sixteen,  of  which  n  are  in  Berlin,  3 
in  Charlottenburg,  i  in  Friedenau,  and  i  in  Wiesbaden. 

It  has  established  or  participated  in  the  establishment  of  the  following 
subsidiary  companies:19 

1880.  The  Deutsche  Handels-  und  Plantagengesellschaft  der  Sudsee- 
inseln,  Hamburg,  capital  stock,  2,750,000  marks  (a  reorgan- 
ized company). 
1883-86.  The    Neu-Guinea-Kompagnie,     capital    stock,     6,000,000 

marks. 

1887.  The  Brasilianische  Bank  fur  Deutschland,  Hamburg  (capital 
stock,  10,000,000  marks,  jointly  with  the  Norddeutsche 
Bank).  The  institution  has  5  branches,  located  as  follows: 
Rio  de  Janeiro,  Sao  Paulo,  Santos,  Porto  Allegre,  and  Bahia. 
1889.  The  Deutsch-Asiatische  Bank,  Shanghai.  It  was  organized  by 
the  Disconto-Gesellschaft  jointly  with  German  and  foreign 
concerns,  and  has  a  paid-up  capital  stock  of  7,500,000 
Shanghai  taels.  It  has  12  branches,  located  as  follows: 
Berlin,  Hamburg,  Tientsin,  Tsingtau,  Hankow,  Hongkong, 
Calcutta,  Tsinanfu,  Peking,  Yokohama,  Kobe  (Japan),  and 
Singapore. 


994 


The     German     G  r  e  a 


a  n 


1894.  The     Banco,     Commerciale     Italiana,    Milan,     .ms. 

105,000,000  lire  (jointly  with  German  and  fort-0 
firms) — 33  branches  in  Italy. 

1895.  The  Bank  fur  Chile  und  Deutschland,  Hamburg,  capital  stock 

10,000,000  marks,  of  which  25  per  cent  or  2,500,000  marks 
has  been  paid  in  (jointly  with  the  Norddeutsche  Bank).  It 
has  9  branches,  located  as  follows:  Valparaiso,  Santiago, 
Concepcion,  Temuco,  Antofagasta,  Victoria,  and  Valdivia, 
in  Chile,  and  La  Paz  and  Oruro  in  Bolivia. 

1897.  The    Banca    Generala    Romana,    Bucharest,    capital    stock, 

10,000,000  lei.  It  has  2  branches,  in  Braila  and  Grajova, 
and  an  agency  in  Constantza. 

1 898.  The  Banque  Internationale  de  Bruxelles,  capital  stock,  25 ,000,000 

francs.     (See  p.  442,  letter  h.} 
1900.  The  Compagnie  Commerciale  Beige,  anciennement  H.  Albert  de 

Bary  &  Co.,   Societ£  anonyme  a   Anvers,   capital   stock, 

5,000,000  francs. 
1905.  The  Bayerische  Disconto-  und  Wechselbank,  Nuremberg,  capital 

stock,  12,000,000  marks  (jointly  with  the  Bayerische  Hypo- 

theken-  und  Wechselbank,  Munich). 

This  bank  has  15  branches,  located  in  Augsburg,  Bam- 

berg,    Bayreuth,    Hersbruck,    Hof,    Kempten,  Kitzingen, 

Kulmbach,    Lauf,    Regensburg,    Roth   i.    B.,    Schwabach, 

Schweinfurt,  Uffenheim,  and  Wiirzburg;  4  deposit  offices, 

in   Neumark  (Oberpfalz),  Pfaffenhofen-on-the-Iler,   Roth- 

enburg-on-the-Tauber,  and  Weissenburg. 

It  has  absorbed  the  following  banking  firms: 

1905.  G    J.    Gutmann,    Nuremberg;    P.    C.    Bonnet, 

Augsburg;  Friedrich  Gunthert,  Wurzburg; 
Jonas  Nordschilds  Nachf.,  Schweinfurt;  Con- 
rad Arnold,  Lauf  and  Hersbruck. 

1906.  Klunk  &  Gerber,  Hof;  Jos.  S.  Schmid,  Barn- 

berg;  Max  Feichtmeyer,  Regensburg;  Fried- 
rich  Grieninger  &  Sohn,  Uffenheim  and 
Rothenburg;  M.  Oettinger  Sohne,  Neumarkt 
(Oberpfalz). 

1907.  Julius     Leisser,    Wurzburg;    S.     Schwabacher 

Nachf.,  Bayreuth  and  Kulmbach. 

1908.  G.  W.  Loos,  Weissenburg;  Hans  Schmitt,  Bam- 

berg;  Siegmund  Edenfeld,  Wurzburg;  Abrell 
&  Deffner,  Kempten;  Jonas  Nordschild, 
Schweinfurt-on-the-Main. 

1909.  August  Ahammer   &  Co.,  Weissenburg  a.  D., 

merged  with  the  bank's  deposit  office  at  the 
same  town. 


995 


National    Monetary     Commission 

(10)  The  OP 
i  .    I'he  Revisions-  und  Vermogensverwaltungs-Aktien-Gesellschaft 

Lr.     '  (Audit  and  Trust  Company) — name  changed  in   1909  to 

"Re-vision,"  Treuhand-Aktiengesellschajt,  Berlin.  Capital 
stock,  1,000,000  marks,  increased  to  2,000,000  in  1909.  The 
institution  has  3  branches  (Cologne,  Dresden,  Leipzig,) 
jointly  with  the  Commerz-  und  Disconto  -  Bank.  The 
former  branch  at  Munich  was  in  1907  made  a  separate 
institution  with  a  capital  stock  of  400,000  marks  under  the 
name  of  the  Bayerische  Revisions-  und  Vermogensierwal- 
tungs-A  ktiengesellschaft. 

1905.  The  Bank  fur  Thuringen,  formerly  B.  M.  Strupp  A.-G.,    in 

Meiningen;  capital  stock,  10,000,000  marks,  of  which 
7,500,000  marks  is  paid  in.  This  bank  was  established 
jointly  with  the  former  banking  house  of  B.  M.  Strupp,  the 
Mitteldeutsclie  Kreditbank,  and  the  Allgemeine  Deutsche 
Kreditanstalt.  It  has  12  branches,  located  as  follows: 
Apolda,  Eisenach,  Frankenhausen  a.  Kyffhauser,  Gotha, 
Hildburghausen,  Jena,  Neustadt  on  the  Orla,  Possneck, 
Ruhla,  Saalfeld,  Salzungen,  and  Sonneberg.  It  has  ab- 
sorbed the  following  firms: 

1905.  B.  M.  Strupp.  Meiningen,  with  branch  offices  in 

Gotha,  Hildburghausen,  Salzungen,  Ruhla, 
and  Jena. 

1906.  Hermann    Lobe,    Meiningen;      the     Meiningen 

branch  of  the  Mitteldeutsche  Kreditbank;  J.  G. 
Bohme  &  Sohn,  Apolda;  Richard  Eberlein, 
Possneck. 

1907.  Severus  Ziegler,  Eisenach;  Nikol.  Martin  Scheler 

&  Sohn,  Saalfeld. 
1909    The  Bankverein  Frankenhausen. 

1906.  The  Deutsch-Afrika  Bank,  capital  stock  1,000,000  marks.     It 

has  branches  in  Swakopmund,  Windhuk,  and  Liideritzbucht, 

and  an  agency  in  Santa  Cruz. 
1906.  The  Banque  de  Credit  (Kreditna  Banka),  Sofia,  capital  stock 

3,000,000  gold  leva  (francs),  of  which  1,000,000  gold  leva 

has  been  paid  in,  jointly  with  S.  Bleichroder  and  the  Nord- 

deutsche  Bank. 
.  The  Stahl   &  Federer  Aktiengesellschaft,   Stuttgart,   capital 

stock   10,000,000  marks.     It  has  3   branches,  located  in 

Heilbronn,  Reutlingen,  and  Pfullingen.     It  has  absorbed 

the  following  firms: 

1907.  I.  Gumbel,  Markt  in   Heilbronn;   Emil  Ruoff, 

Reutlingen. 

1908.  Johannes  Rieger,  Pfullingen. 

It  has  a  community  of  interest  with  the  Gewerbebank 
in  Ulm. 


996 


The     German     Great    Banks 

The  Disconto-Gesellschaft  has  absorbed  the  following  firms: 
1904.  J.  Schultze  &  Wolde,  Bremen. 

1906.  Eugen  Schlieper  &  Co.,  Berlin;  Gebr.  Neustadt,  Frankfort-on- 

the-Main. 

1907-8.  Meyer  Cohn,  Berlin. 
1909.  Bamberger    &    Co.,  Mainz.     This   firm   had   on   November, 

1908,  absorbed  the  firm  Gebriider  Oppenheim,  of  Mainz. 
Through  stock  ownership,  the  Disconto-Gesellschaft  has  been  united  in 
a  community  of  interest  with  the  following  institutions: 
1895.  Norddeutsche  Bank,  Hamburg. 
1901.  Allgemeine  Deutsche  Kreditanstalt,  Leipzig. 

1904.  Barmer  Bankverein,  Hinsberg,  Fischer  &  Co.,  Barmen. 
1904-5.  Siiddeutsche   Disconto-Gesellschaft,    Mannheim; 

Geestemimder  Bank,  Geestmunde. 

1 .  The  Norddeutsche  Bank,  Hamburg,  capital  stock  50,000,000  marks,  cash 
contributions  of   "complementary"  partners  (Komplementare)  1,200,000 
marks,  ordinary  surplus  5,120,000  marks,  special  reserves  6,235,000  marks. 
It  has  i  branch  in  Altona;    6  deposit  (giro)  offices,  5  of  which  are  in  Ham- 
burg and  i  in  Harburg;    and  i  commandite,  Ephraim  Meyer  &  Sohn  in 
Hanover.     It  absorbed  in  1904  the  banking  firm  of  W.  S.  Warburg,  in 
Altona. 

2.  The  Allgemeine  Deutsche  Kreditanstalt,  Leipzig;  capital  stock,  90,000,000 
marks;  surplus,  37,850,751  marks.     It  has  21  branches,  located  as  follows: 
Altenburg,  Annaberg,  Bautzen,  Bernburg,  Chemnitz,  Dresden,  Freiberg, 
Gera,  Glauchau,  Greiz,  Grimma,  Leopoldshall,  Limbach  in  Saxony,  Mark- 
ranstadt,  Meerane,  Oschatz,  Pirna,  Riesa,  Schkeuditz,  Schmolln,  Zittau, 
and,  since  1909,  Meuselwitz. 

It  has  1 5  deposit  offices  (9  in  Leipzig  and  suburbs,  6  in  Dresden  and  sub- 
urbs), but  no  commandites.     It  has  absorbed  the  following  banks  and  firms: 
1873.  Lingke  &  Co.,  Altenburg. 

1901.  Becker  &  Co.,  Leipzig  and  Greiz.     Before  that  time  the  Dis- 

conto-Gesellschaft had  had  an  interest  in  this  firm. 

1902.  C.  F.  Blaufuss,  Gera. 

1903.  Giinther  &  Rudolph,  Dresden. 

1905.  Vereinsbank,  Grimma  (capital  stock,  500,000  marks);  Erngt 

Berndt,  Annaberg;  C.  G.  Lochmann,  Wwe.  &  Sohn,  Oschatz; 
Kunath  &  Nieritz,  Chemnitz. 

1907.  Ketzscher  &  Andreae,  Pirna;  Bernburger  Bankverein  Wich- 

mann  &  Co.,  Bernburg  and  Leopoldshall  (Stassfurt) ;  Ferdi- 
nand Heyne,  Glauchau;  Ludwig  &  Co.,  Freiberg  (Saxony). 
Through   stock  ownership   the   Allgemeine   Deutsche   Kreditanstalt  is 
united  in  a  community  of  interest  with  the  following  banks: 

The  V ogtldndische  B&nk,  Plauen  i.  V.  (capital  stock,  5,500,000  marks), 
with  branches  in  Auerbach  and  Falkenstein  i.  V.,  Klingenthal  i.  S.,  and 
Reichenbach  i.  V. ;  Busse  &  Co.,  Berlin;  Bayerische  Disconto-  und  Wechsel- 
bank  in  Nuremberg;  Bank  fur  Thuringen,  formerly  B.  M.  Strupp,  Meiningen. 


997 


National    Monetary     Commission 

Since  1904-5  the  Oberlausitzer  Bank,  in  Zittau  (capital  stock,  2,700,000 
marks,  branch  at  Neugersdorf),  and  the  Vereinsbank,  in  Zwickau  (capital 
stock,  4,500,000  marks).  The  shares  of  the  Allgemeine  Deutsche  Kredit- 
anstalt,  which  had  to  be  given  in  exchange  for  the  shares  of  these  institu- 
tions, were  obtained  primarily  from  the  holdings  of  the  Disconto-Gesell- 
schaft.  On  the  supervisory  board  of  the  Oberlausitzer  Kreditanstalt  both 
the  Allgemeine  Kreditanstalt  and  the  Disconto-Gesellschaft  are  represented. 

3.  The  Banner  Bankverein  Hinsberg,  Fischer  &  Co.,  Barmen  (capital 
stock,  59,836,200  marks),  has    17   branches,  located   as  follows:  Bielefeld, 
Cologne,  Crefeld,  Dortmund,  Diisseldorf,  Hagen,  Hamm,  Iserlohn,  Lennep, 
Liidenscheid,    Maria-Gladbach,    Ohligs,    Osnabriick,   Remscheid,   Rheydt, 
Soest,  and  Solingen. 

It  has  5  deposit  offices,  located  as  follows:  Barmen-Rittershausen,  Hohen- 
limburg,  Uerdingen,  and  2  in  Diisseldorf. 

It  has  absorbed  the  following  banks  and  firms.1 

1898.  The  Gladbacher  Bankverein  Quack  &  Co.,  Maria-Gladbach. 

1900.  Leffmann  Stern,  Hagen. 

1902.  The  Diisseldorfer  Bankverein  (capital  stock,  9,000,000  marks). 

1904.  The  Dortmunder  Bankverein,  which  had  acommandite  inter- 

est in  the  banking  house  Balcke  &  Co.,  and  had  branches  in 
Hamm  and  Soest. 

1905.  A.  W.  Dreyer,  Wwe.,  Bielefeld;  Wallach  &  Emanuel,  Iserlohn; 

N.  Blumenfeld,  Osnabriick;  The  Cref elder  Gewerbebank, 
Crefeld  (capital  stock,  2,000,100  marks);  the  Liidenscheider 
Bank,  formerly  Ludenscheider  Volksbank  (capital  stock, 
1,250,000  marks). 

1906.  Albert  Simon  &  Co.,  Kommanditgesellschaft,  Cologne. 

1907.  The  Lenneper  Volksbank,  Lennep. 

1908.  The  Bonner  Privatbank,  Bonn. 

The  Disconto-Gesellschaft  delegates  one  of  its  managing  partners  to 
serve  on  the  supervisory  board  of  the  Barmer  Bankverein,  and  the  Barmer 
Bankverein  in  turn  delegates  one  of  its  directors  to  serve  on  the  supervisory 
board  of  the  Disconto-Gesellschaft. 

4.  The    Suddeutsche    Disconto-Gesellschaft,     Mannheim   (capital    stock, 
31,250,000  marks),  has  4  branches,  located  as  follows:  Freiburg  i.   Br., 
Lahr  i.  B.  Landau,   and   Pforzheim;    i   deposit  office,  in   Heidelberg;    6 
agencies,  in  Annweiler,  Bergzabern,  Edenkoben,  Germersheim,  Mullheim 
i.  B.,  and  Neustadt  i.  Schw. ;  and   i   commandite,  viz,  E.  Ladenburg  in 
Frankfort  on-the-Main. 

It  has  absorbed  the  following  firms: 

1904-5.  W   H.  Ladenburg  &  Sohne,  Mannheim. 

1906.       Weil   &    Benjamin    (Kommanditgesellschaft),    Mannheim; 

Stosser-Fischer,  Lahr;  J.  M.  Bernion,  Landau. 
1908.       Jacob  Baer,  Bruchsal. 


998 


The     German     Great     B 


a  n 


The  Disconto-Gesellschaft  is  represented  on  the  supervisory  board  of 
the  Siiddeutsche  Disconto-Gesellschaft,  and  one  of  the  partners  of  the  firm 
E.  Ladenburg,  has  entered  the  supervisory  board  of  the  Disconto-Gesell- 
schaft. 

Finally,  since  1907,  the  Disconto-Gesellschaft  is  on  friendly  terms  with 
the  Magdeburger  Bankverein,  of  Magdeburg  (capital  stock,  15,000,000 
marks)  (see  above,  p.  62 9) .  This  became  manifest  in  the  election  of  a  director 
of  the  Disconto-Gesellschaft  to  a  place  on  the  supervisory  board  of  the 
Magdeburger  Bankverein. 

VI.  DRESDNER  BANK,  DRESDEN. 

[Founded  1872.] 

Capital,  180,000,000  marks.     (200,000,000  marks  since  1910.) 
Surplus,  51,500,000  marks. 

The  Dresdner  Bank  has  27  branches,  located  as  follows:  Altona,  Augs- 
burg, Bautzen,  Bremen,  Biickeburg,  Kassel,  Chemnitz,  Detmold,  Dresden, 
Emden,  Freiburg  i.  B.,  Frankfort-on-the-Main,  Fiirth,  Greiz,  Hamburg, 
Hanover,  Heidelberg,  Leer,  London,  Liibeck,  Mannheim,20  Meissen, 
Munich,  Nuremberg,  Plauen  i.  V.,  Wiesbaden,  and  Zwickau. 

It  has  i  commandite,  viz.,  the  exchange  office  (Wechselstube)  Bosse,  Keil 
&  Co.,  Berlin,  formerly  the  commandite  of  the  Deutsche  Genossenschafts- 
bank  Sorgel,  Parrisius  &  Co. 

Since  1895  its  deposit  offices  have  grown  to  57  in  number — 23  in  Berlin, 
2  each  in  Charlottenburg,  Schoneberg,  Friedenau,  and  Gross-Lichterfelde; 
i  each  in  Pankow,  Steglitz,  Wilmersdorf,  Rixdorf,  Tempelhof,  and  Altona; 
4  in  Dresden,  i  in  Frankfort-on-the-Main,  1 1  in  Hamburg,  i  in  Linden 
near  Hanover,  2  in  Nuremberg,  and  i  in  Wiesbaden.  In  1909  there  were 
added  branches  in  Eschwege  and  Fulda. 

The  Dresdner  Bank  has  cooperated  in  the  establishment  of  the  following 
subsidiaries:21 

1889.  The Deutsch-Asiatische  Bank  (with  other  firms).     (See  p.  983.) 
1894.  The  Banca  Commerciale  Italiana  (with  other    firms).     (See 

p.  983.) 

1904.  The  Deutsch-Westafrikanische  Bank  (established  jointly  with 
the  Deutsch-Westafrikanische  Handelsgesellschaft.  (See  p. 
457,  sub  4.) 

The  capital  stock  of  this  company  is  1,000,000  marks. 
The  bank  is  a  colonial  company,  having  its  office  in  Berlin, 
and  branches  in  Hamburg,  Lome,  and  Duala.  Its  purpose 
is  to  regulate  the  currency  circulation  and  facilitate  pay- 
ments both  within  the  German  colony  of  West  Africa,  and  in 
its  relations  with  foreign  countries,  and  to  carry  on  banking 
in  accordance  with  its  charter. 
1904.  Speyr  &  Co.,  A.-G.,  Basle  (capital  stock,  15,000,000  francs). 


999 


National    Monetary     Commission 


I9°5-22  The  Treuhand  Vereinigung,  A.-G.,  Berlin  (capital  stock, 
1,000,000  marks),  with  a  branch  in  Dresden  and  an  office 
jointly  with  the  A.  Schaaffhausen'scher  Bankverein  in 
Cologne. 

The  Deutsche  Orientbank,  A.-G.,  Berlin,  capital  stock, 
16,000,000  marks,  established  jointly  with  the  National 
bank  f  iir  Deutschland,  see  pages  446  and  454. 

1906.  The  Deutsch-Sudamerikanische  Bank,  A.-G.,  Berlin,  capital 
stock,  20,000,000  marks,  established  jointly  with  the  A. 
Schaaffhausen'scher  Bankverein. 

The  Dresdner  Bank  has  absorbed  the  following  banks  and 
firms: 

1872.  Michael  Kaskel,  Dresden. 

1873.  The  Sachsischer  Bankverein,  capital  stock,  5,250,000 

marks. 

1877.  The  Sachsische  Kreditbank,  capital  stock,  9,000,000 
marks. 

1891.  R.  Thode  &  Co. 

1892.  The  Anglo-Deutsche  Bank,  Hamburg,  capital  stock, 

12,300,000  marks. 

1895.  The  Bremer  Bank,  Bremen,  capital  stock,  20,000,000 

marks. 

1896.  S.  E.  Wertheimber,  Nuremberg  and  Fiirth. 

1898.  Alexander  Simon,  Hanover;  W.  J.  Gutmann,  Nurem 

berg. 

1899.  The  Niedersachsische  Bank,  Biickeburg,  capital  stock, 

6,000,000  marks. 

1904.  The  Deutsche  Genossenschaftsbank  Sorgel,  Parrisius 
&  Co.,  Frankfort  on-the-Main  and  Berlin,  capital 
stock,  30,000,000  marks. 

Through  stock  ownership  this  bank  had  a 
community  of  interest  with  the  W urttembergische 
Landesbank  of  Stuttgart,  capital  stock,  8,000,000 
marks,  with  2  branches  (Ulm  and  Heilbronn) 
and  i  deposit  office  (Cannstatt). 

The    Wurttembergische    Landesbank    had 
absorbed  thef  olio  wing  firms: 

1899.  Breunig  &  Fischer,  Stuttgart. 

1900.  Albert  Schmidts  Nachfolger,  Heil- 

bronn, and  had  a  commandite 
interest  in  the  Wechselstube 
Bosse,  Keil  &  Co.,  in  Berlin. 

In  taking  over  and  continuing  the  business  of  the  Genos- 
senschaftsbank (Bank  for  Cooperative  Credit  Societies), 
the  Dresdner  Bank  instituted  special  cooperative  credit  de- 
partments with  cooperative  society  advisory  councils  in  Ber- 


1000 


The     German     Great     Banks 


lin  and  Frankfort-on-the-Main  in  order  to  minister  to  the 
business  of  the  German  industrial  and  agricultural  coopera- 
tive societies. 

1904.  Von  Erlanger  &  Sohne,  Frankfort-on-the-Main,  ab- 
sorbed by  the  Dresdner  Bank  jointly  with  the  A. 
Schaaffhausen'scher  Bankverein.  Through  stock 
ownership,  this  firm  had  a  community  of  interest 
with  the  following  banks:23 

(a)  The  Oldenburgische  Landesbank,  Oldenburg, 
capital  stock,  3,000,000  marks,  of  which  40  per 
cent,  or  1,200,000  marks,  is  paid  up.  This  bank 
has  7  branches  and  43  agencies. 

(6)  The  Mecklenburgische  Bank,  Schwerin,  capi- 
tal stock,  5,000,000  marks,  of  which  40  per  cent,  or 
2,000,000  marks,  is  paid  in.  It  has  a  branch  in 
Neubrandenburg  and  54  agencies  and  has  in  turn 
a  community  of  interest  with  the  following  banks: 
Rostocker  Gewerbebank,  A.-G.,  Rostock,  capital 
stock,  980,000  marks,  with  26  agencies. 

Neuvorpommersche  Spar-  und  Kreditbank,  A.-G., 
Stralsund,  capital  stock,  1,000,000  marks,  with  26 
agencies. 

The  Dresdner  Bank  and  the  A.  Schaaffhau- 
sen'scher Bankverein  are  both  represented  on  the 
supervisory  board  of  the  Mecklenburgische  Bank. 

(c)  The    Landgrdflich-Hessische    konzessionierte 
Landesbank,    Homburg    v.    d.  H.,  capital    stock, 
1,000,000  marks,  with  2  branches  (Nauheim  and 
Friedberg). 

(d)  The  Schwarzburgische  Landesbank,  Sonders- 
hausen  (capital  stock,  2,500,000  marks,  of  which 
1,000,000  marks  are  paid  in),  with  6   branches, 
located  as  follows: 

Arnstadt,     Ilmenau,     Rudolstadt,  Saalfeld,  Suhl, 
Weida. 

The  Dresdner  Bank  and  the  A.  Schaaffhausen' 
scher  Bankverein  are  represented  on  the  supervis- 
ory board  of  this  bank. 

1906.  Ed.  Kauffmann  &  Fehr,  Freiburgi.  B.24;  Ernst  Heyde- 
mann,  Meissen;  C.  H.  Reinhardt,  Bautzen. 

1907.  Paul  von  Steffen,  Augsburg. 

1908.  M.  Kapeller,  Munich;  Eduard  Bauermeister,  Zwickau; 
Kahl  &  Oelschlagel,  Dresden,  whose  business  was  then 
in  process  of  liquidation:  Mauer  &  Plaut,  Kassel. 


1001 


National     Monetary     Commission 


1909.  David.  M.  Kahn,  Eschwege;  F.  Wallach,  Fulda. 

Through  stock  ownership25  the  Dresdner  Bank  has  a 
community  of  interest  with  the  following  banks  since  the 
dates  given: 

1903.  (i)  The   Mdrkische    Bank,    Bochum,    capital    stock 

9,000,000  marks. 

(2)  The  Rheinische  Bank,  Essen  (formerly  Mulheim- 
on-the-Ruhr),  capital  stock  2 1,000,000  marks.26 

1904.  (3)  The  Oberschlesische  Bank,  Beuthen,  capital  stock, 

2,500,000  marks. 

(4)  The  Wurttembergische  Landesbank,  Stuttgart,  capi- 

tal stock,  8,000,000  marks. 

(5)  The  Oldenburgische  Landesbank,  Oldenburg,  capi- 

tal stock,  3,000,000  marks,  of  which  1,200,000 
marks  are  paid  in. 

(6)  The    Mecklenburgische    Bank,  Schwerin,  capital 

stock,  5,000,000   marks,    of    which   2,000,000 
marks  are  paid  in. 

(7)  TheLandgrdflichHessische  konzessionierte  Landes- 

bank   in   Homburg  v.   d.    H.,    capital    stock, 
1,000,000  marks. 

(8)  The  Schwarzburgische  Landesbank,27  Sondershau- 

sen,  capital  stock,  2,500,000  marks,  of  which 
1,000,000  marks  are  paid  in. 

(1)  The  Mdrkische  Bank,  Bochum,  has  9  branches,  located. as  follows: 
Arnsberg,    Beckum,    Castrop,    Dortmund,    Gelsenkirchen,    Langendreer, 
Minister  i.  W.,  Recklinghausen,  and  Witten.     It  has  2  agencies,  in  Buer 
and  Oelde,  and  i  exchange  office  at  Wanne.     It  absorbed  in — 

1898.  The  banking  firm  Albert  Lauffs,  Bochum. 
1899.  The  Herner  Bank,  Herne,  capital  stock,  1,000,000  marks. 

(2)  The  Rheinische  Bank,  Essen  (formerly  in  Mulheim-on-the-Ruhr),has 
4  branches  at  Mulheim,  Duisburg,  Meiderich,  and  Dinslaken,  and  i  exchange 
office  at  Hochfeld.     It  has  absorbed  the  following  firms: 

1897.  Gust.  Hanau,  Mulheim-on-the-Ruhr. 

1905.  Herm.  Thate,  Meiderich. 

1906.  Dietrich  Schroter,  Dinslaken. 

1907.  Fr.  H.  Moeschlers  Sohne,  Meerane  (i.  S.). 

The  Dresdner  Bank  is  represented  on  the  supervisory  board  of  the 
Rheinische  Bank. 

(3)  The  Oberschlesische  Bank,  Beuthen,  has  2  deposit  offices  (exchange 
offices),  i  in  Konigshiitte  and  i  in  Tarnowitz. 

(4)  The  Wurttembergische  Landesbank,  Stuttgart,  has  2  branches  (Ulm 
and  Heilbronn)  and   i  deposit  office  (in  Kannstadt),  had  a  community  of 
interest  with  the  Deutsche  Genossenschaftsbank  until  1904,  and  since  then 
with  the  banks  formerly  affiliated  with  the  banking  house  von  Erlanger  & 
Sohne  (see  p.  1001),  i.  e.,  with  the  following: 


The     German     Great    Banks 


(5)  The  Oldenburgische  Landesbank,   Oldenburg,   with  8  branches  and 
43  agencies. 

(6)  The  Mecklenburgische  Bank,  Schwerin,  which  has  a  branch  in  Neu- 
brandenburg  and  50  agencies,  and  has  a  community  of  interest  with  the 
(a)  Rostocker  Gewerbebank,  A.-G.,  Rostock,  capital  stock,  2,000,000  marks, 
with  50  agencies,    and   the   (6)  Neuvorpommersche  Spar-  und  Kreditbank, 
Stralsund,  capital  stock,  1,000,000  marks,  with  26  agencies. 

(7)  Landgrdftick  Hessische  Konzessionierte  Landesbank,  Homburg  v.  d. 
H.,  with  two  branches  (Nauheim  and  Friedberg  in  Hesse). 

(8)  Schwarzburgische  Landesbank,  Sondershausen,  with  6  branches. 
Between  1903  and  the  end  of  1908  the  Dresdner  Bank  was  united  by 

agreement  with  the  A.  Schaaffhausen'scher  Bankverein  in  a  community  of 
interest.  The  A.  Schaaffhausen'scher  Bankverein,  of  Cologne,  has  a  capital 
stock  of  145,000,000  marks. 

The  contract  was  in  substance  as  follows:  The  community  of  interest  was 
to  run  from  January  i ,  1 904,  for  thirty  years.  The  two  companies  were  not 
merged,  but  the  business  of  both  was  conducted  jointly,  the  net  profits 
were  pooled,  and  then  divided  in  proportion  to  the  capital  stock  of  each, 
including  surplus  funds  as  shown  by  the  balance  sheets.  Only  such  sums 
as  had  been  permanently  put  into  the  surplus  were  to  be  counted — i.  e., 
amounts  definitely  set  aside  as  surplus,  and  not  funds  set  aside  to  cover 
particular  risks. 

The  annual  profits  were  pooled  under  the  following  conditions:  Each 
company  was  to  keep  its  own  profit-and-loss  account,  regardless  of  its  com- 
munity of  interest.  From  the  gross  profits  each  bank  was  to  deduct  first 
all  the  general  expenses  and  the  amounts  required  to  be  written  off  or  set 
aside  for  surplus  funds  by  statute  or  by  the  by-laws,  and  then  the  amounts 
of  compensation  shown  by  the  books  as  due  to  the  general  manageual  staff, 
the  managers  of  the  branches,  to  other  officials  and  members  of  the  super- 
visory board,  the  bonuses  to  employees,  and  a  suitable  amount  for  deprecia- 
tion on  bank  buildings.  The  remaining  net  profits  were  to  go  into  a  com- 
mon fund,  to  be  divided  on  the  basis  indicated  above.  After  the  share 
of  the  profits  due  to  each  bank  had  been  determined,  each  institution  was 
to  prepare  independently  its  own  final  balance  sheet  and  profit-and-loss 
account,  in  accordance  with  statute  and  its  by-laws. 

Whatever  amount  one  bank  might  have  to  pay  to  the  other  was  to  be 
entered  as  profit  or  loss  in  the  profit-and-loss  account  of  either  bank,  de- 
creasing by  so  much  the  amount  of  net  profits  of  the  bank  making  payment, 
and  increasing  by  so  much  the  net  profits  of  the  bank  receiving  payment. 

The  computation  o£  the  actual  allowances  (Tantiemen)  to  the  members 
of  the  managerial  staff  and  o£  the  supervisory  board  were  thus  to  be  based 
not  on  the  amounts  shown  by  the  provisional  profit-and-loss  statement,  but 
on  the  final  determination  of  net  profits. 

The  pooling  applied  only  to  the  annual  profits,  but  not  to  losses.  In  this 
case  the  accounts  of  either  company  showed  a  net  loss  for  the  year, 
loss,  unless  made  up  by  the  share  in  the  profits  of  the  other  company, 


1003 


National    Monetary     Commission 

was  to  be  covered  from  its  surplus  or  in  some  other  manner,  in  order  that 
the  net  profits  of  the  following  year  might  not  be  reduced  by  any  losses 
carried  over  from  the  preceding  year's  account.  In  order  to  insure  unity 
of  management  and  the  pursuance  of  a  common  policy,  the  following  pro- 
visions were  made  and  carried  into  effect: 

(1)  Either  bank  was  to  be  represented  by  two  of  its  executive  officers, 
and  three  members  of  its  supervisory  board  on  the  supervisory  board  of  the 
other  bank. 

(2)  For  the   preliminary  consideration  of  important   transactions  the 
supervisory  board  of  either  bank  was  to  elect  from  its  midst  a  standing 
committee,  composed  of  an  equal  number  of  members,  who  were  to  be 
joined  by  two  persons,  normally  executive  officers,  of  the  other  company. 

(3)  These  two  committees  combined  were  to  form  a  council  of  delegates 
(Delegationsrat).     Aside  from  passing  upon  questions  involving  differences 
of  opinion,  this  council  was  to  approve  the  provisional  balance  sheet  and 
profit-and-loss  statement  drawn  up  by  each  bank  with  the  view  of  arriving 
at  the  joint  profits,  to  pass  upon  the  division  of  the  common  fund,  and  par- 
ticularly to  determine  what  sums  were  to  be  written  off  or  set  aside  for  sur- 
plus funds  before  computing  profits. 

The  increase  of  capital  by  either  company  was  made  dependent  on  the 
approval  of  the  council  in  the  sense  that  any  increase  of  capital  stock  made 
by  either  bank  without  such  approval  was  to  be  disregarded  in  apportioning 
the  annual  profits,  and  furthermore  that  such  an  increase  was  to  give  to 
the  other  bank  the  right  to  withdraw  from  the  agreement. 

It  was  further  agreed  that  whenever  experience  showed  that  a  modifica- 
tion of  the  terms  of  the  agreement  became  necessary  in  any  respect,  any 
change  was  to  be  approved  by  at  least  two-thirds  of  all  the  members  of 
either  supervisory  board,  in  the  same  way,  as  when  the  original  agreement 
was  made. 

The  community  of  interest,  as  a  matter  of  fact,  came  to  an  end  on  Jan- 
uary i,  1909,  although  the  annual  report  spoke  only  of  a  "modification." 
"  Provision  was  however  made  "  for  the  continuation  of  the  existing  inti- 
mate relations  and  the  mutual  representation  on  both  boards  under  a  new 
agreement. 

For  data  regarding  the  Mitteldeutsche  Kreditbank,  see  note28  on  page  1016. 

VII.    NATlONAIvBANK   FUR    DEUTSCHLAND,  IN    BERLIN. 
[Founded  in  1881.] 

Share  capital,  80,000,000  marks. 

Surplus,  13,220  ooo  marks. 

Branches. — None. 

Commandites  (2). — Erttel,  Freyberg  &  Co.  in  Leipzig  and,  since  1905, 
Born  &  Busse  in  Berlin. 

Deposit  offices  (17). — Fourteen  in  Berlin  and  i  each  in  Charlottenburg, 
Potsdam,  and  Steglitz. 


1004 


The     German     Great     B 


a  n 


Jointly  with  several  other  concerns  the  bank  founded  the  following 
subsidiary  companies  (Tochtergesellschaften):29 

1889.  The  Deutsch-Asiatische  Bank.     (See  p.  983.) 
1895.  The  Credito  Italiano  in  Rome  (share  capital,  75,000,000  lire), 
with  17  branches. 

Jointly  with  the  Banque  Nationale  de  Gr&ce,  it  founded: 

1904.  The   Banque  d' Orient  in   Athens  (share  capital,   10,000,000 

francs) ;  branches  in  Saloniki  and  Smyrna. 

1905.  Jointly    with    the    Dresdner    Bank    and    the    A.    Schaaff- 

hausen'scher  Bankverein,  it  founded  the  Deutsche  Orientbank 
Aktiengesellschaft  in  Berlin,  which  took  over  the  former 
branches  of  the  Banque  d' Orient  in  Hamburg  and  Con- 
stantinople.30 Deposit  offices,  3,  including  Stamboul  and 
Pera.  Additional  branches  have  been  opened  in  Cairo, 
Alexandria,  Brussa,  Kalamata,  Constantinople,  Saloniki, 
Smyrna,  Tangier,  and  Casablanca  (share  capital,  16,000,000 
marks). 

Has  a  community  of  interest  since  1905  with  the  Deutsche  Paldstinabank 
in  Berlin  (share  capital,  5,000,000  marks),  founded  in  1899,  with  5  branches 
in  Haifa,  Jaffa,  Jerusalem,  Beirut,  and  Hamburg;  founded  in  turn  as  its 
subsidiary  (Tochtergesellschaft)  the  Levante-Kontor,  G.  m.  b.  //.,  with  office 
in  Constantinople. 

The  Nationalbank  fur  Deutschland  absorbed  the  following  banking  firms: 
1898.  Jacob  Landau  in  Berlin. 
1904.  S.  Lange  in  Berlin. 

1907.  Born  &  Busse  in  Berlin,  which  since  1905  was  conducted  as  a 
commandite  of  the  bank  in  conjunction  with  other  partners.31 

VIII.   A.  SCHAAFFHAUSEN 'SCHER  BANKVEREIN,  IN  COLOGNE-ON-THE-RHINE 

[Founded  in  1848.] 

Share  capital,  145,000,000  marks. 
Surplus,  34,157,125  marks. 

Branches  (io).32 — Berlin  (since  1891),  Bonn,  Cleve,  Crefeld,  Duisburg) 
Dusseldorf,  Neuss,  Rheydt,  Ruhrort,  and  Viersen. 

Commandite — Philipp  Elimeyer  in  Dresden,  since  1898. 
Deposit  offices  (75). — Cologne  (3),  Godesberg,  Charlottenburg,  Schoneberg, 
Potsdam,    Diilken,    Emmerich,   Grevenbroich,    Kempen,    Krefeld,    Moers, 
Odenkirchen,  Wesel. 

Founded  or  took  part  in  the  founding  of  the  following  subsidiary  com- 
panies (Tochtergesellschaften)  ,33 

1889.  The  Deutsch-Asiatische  Bank  jointly  with  other  domestic  and 

foreign  concerns.     (See  p.  983.) 

1898.  The   Banque  Internationale  de  Bruxelles   jointly   with   other 
concerns.     (See  p.  442,  letter  /*.) 


1005 


National    Monetary     Commission 

1900.  The    Westfdlisch-Lippische    Vereinsbank,    A.-G.,   in    Bielefeld 
(share  capital,  7, 000,000  marks) .     The  latter  has  4  branches, 
viz,  in  Detmold,  Herford,  Lemgo,  Minden;  2  deposit  offices, 
Oeynhausen  and  Rinteln  on  the  Weser. 
It  absorbed  the  following  banking  firms: 
1900.  Katzenstein  &  Sohne,  Bielefeld. 
1900.  Gebriider  Siekmann  in  Herford. 
.  Salomon  &  Oppenheimer  in  Detmold  and  Lemgo. 

1904.  Jointly  with  the  Dresdner  Bank,  the  Stock  Company  Speyr  & 

Co.  in  Basle  (share  capital,  15,000,000  francs). 

1905.  Jointly  with  the  Dresdner  Bank,  the  Treuhand-Vereinigung, 

Aktiengesellschaft,\n  Berlin  (share  captal,  1,000,000  marks). 

.  Jointly  with  the  Dresdner  Bank  and  the  Nationalbank  fur 

Deutschland,  the  Deutsche  Orientbank,  A  ktiengesellsch-aft,  in 
Berlin  (share  capital,  16,000,000  marks),  with  branches  in 
Constantinople  and  Hamburg,  taken  over  from  the  Banque 
d'Orient,  and  additional  branches  in  Alexandria,  Brussa, 
Cairo,  Kalamata,  Saloniki,  and  Smyrna. 

1906.  Jointly  with   the   Dresdner   Bank,  the    Deutsch-Sudamerika- 

nische  Bank,  Aktiengesellschaft,  in  Berlin  (share  capital, 
20,000,000  marks).  (See  p.  446.) 

The  A.  Schaaffhausen'scher  Bankverein  absorbed  the  following  banking 
firms  and  institutions: 

1903.  The  banking  firm  A.  &  L.  Camphausen  in   Cologne-on-the- 

Rhine. 

1904.  The    Westdeutsche    Bank,    formerly   Jonas    Cahn,    in    Bonn 

(share  capital,  8,000,000  marks).  Originated  from  the 
transformation  in  1896  of  the  banking  firm  Jonas  Cahn  in 
Bonn,  and  took  over  in  1898  the  banking  firm  Solmitz  & 
Cohen  in  Cologne-on-the-Rhine. 

1904.  The  Niederrheinische  Kredit-Anstalt,  formerly  Peters  &  Co., 
in  Crefeld  (share  capital,  21,000,000  marks)  with  twelve 
branches,  in  Duisburg,  Rheydt,  Ruhrort,  Neuss,  Emmerich, 
Mors,  Grevenbroich,  Odenkirchen,  Viersen,  Wesel,  Cleve, 
and  Kempen-on-the-Rhine. 

1904.  Jointly  with   the   Dresdner   Bank,  the  banking   house   von 
Erlanger  &  Sohne  in  Frankfort-on-the-Main.     (See  p.  1001.) 
1908.  The  banking  firm  Blumberg  &  Gollmick  in  Berlin. 
The  A.  SchaafThausen 'scher  Bankverein  maintains  community  of  interest 
relations  34  with  the  following  institutions : 
I.  Through  ownership  of  shares: 

(i)  Since  1901  with  the  Pfdlzische  Bank  in  Ludwigshafen  (share  capital, 
50,000,000  marks).  Branches,  16,  viz,  in  Alzey,  Bamberg,  Bensheim  a;  d.  B., 
Darkheim  a.  d.  D.,  Frankenthal,  Frankfort-on-the-Main,  Kaiserslautern, 
Landau  (Palatinate),  Mannheim,  Munich,  Neustadt  a.  d.  H.,  Nuremberg, 
Pirmasens,  Speyer,  Worms,  and  Zweibriicken.  Agencies,  4,  viz,  in  Donau- 


1006 


The     German     Great     Banks 


eschingen,  Gemersheim,  Griinstadt,  and  Osthofen  (Rhenish  Hesse).  Ex- 
change and  deposit  offices,  n,  viz,  Frankfort-on-the-Main,  4;  Munich,  3; 
Lambrecht,  i ;  Lampertheim,  i ;  Landstuhl,  i .  Absorbed  the  following 
banks  and  banking  firms : 

1886.  The  Volksbank  in  Ludwigshafen. 

1894.  The  banking  firm  Joh.  Franck  in  Worms  on-the-Rhine;  the 

banking  firm  Louis  Dacque"  in  Neustadt  a.  d.  H. 

1895.  The  Deutsche  Unionbank  in  Mannheim  (founded  in  1873  with 

a  capital  of  6,000,000  marks)  and  in  Frankfort-on-the-Main, 
which  in  turn  had  absorbed  the  banking  firm  Gebr.  Sonne- 
berg  in  Frankfort-on-the-Main. 

1896.  The  banking  firm  J.  F.  Haid  in  Speyer. 

1897.  The  banking  firm  Miiller  &  Weyland  in  Landau;  the  banking 

firm  Karl  Weyland  in  Landau ;  the  banking  firm  Hermann 
Menner  in  Landau;  the  banking  firm  Zweibriicker  Bank, 
Lehmann,  Miiller  &  Co.,  in  Zweibrucken. 

1898.  The  banking  firm  Bloch  &  Co.,  in  Munich  and  Nuremberg; 

the  banking  firm  Seb.  Pichler's  sel.  Erben  in  Munich;  the 
banking  firm  Reichard  &  Glaser  in  Frankenthal. 

1899.  The    Vorschussverein    in    Bamberg;  the    Vorschuss-verein    in 

Alzey. 

1900.  The  banking  firm  Markus  Levy  in  Worms-on-the-Rliine. 
.  The  Volksbank  in  Bensheim. 

1908.  The  banking  firm  Baruch  Bonn  in  Frankfort-on-the-Main. 
The  Volksbank  in  Germersheim. 

(2)  Since  1903  with  the  Mittelrheinische  Bank  in  Coblenz  (share  capital, 
20,000,000   marks).     Branches,  3,  viz,  in  Duisburg,  Meiderich,  and  Metz. 
The  Mittelrheinische  Bank  maintains  community  of  interest  relations  with 
the  following  institutions: 

The  Mulheimer  Bank  in  Mulheim-on-the-Ruhr,  founded  in  1889  with  a 
share  capital  of  9,000,000  marks  (number  of  branches,  3,  viz.,  in  Hamborn, 
Oberhausen,  and  Sterkrade) ;  the  Dorstener  Bank  in  Dorsten,  and  the  Mdr- 
kischer  Bankverein  in  Gevelsberg. 

A  director  of  the  A.  Schaaffhausen'scher  Bankverein  and  a  former  direc- 
tor of  the  Bankverein,  at  present  a  director  of  the  Rheinische  Bank,  have 
joined  the  supervisory  board  of  the  Mittelrheinische  Bank. 

(3)  Since  1905  with  the  Ostbank  fur  Handel  und  Gewerbe  in  Posen,  a  con- 
stituent of  the  Darmstadter  Bank  group  (see  p.  984,  No.  2),  with  a  share  capi- 
tal of  18,000,000  marks,  which  absorbed  in  1905  the  Ostdeutsche  Bank  votm. 
J.  Simon  Ww.  &  Sohne  (share  capital,  10,000,000  marks),  with  which  the 
A.  Schaaffhausen'scher  Bankverein  had  been  maintaining  community  of 
interest  relations. 

II.  By  agreement: 

The  A.  Schaaffhausen'scher  Bankverein  maintained  a  community  of 
interest  with  the  Dresdner  Bank  from  1903  to  January  i,  1909.  (The 
tenor  of  the  earlier  agreement  is  stated  above  on  p.  1003  under  the  head  of 


1007 


National     Monetary     Commission 

the  Dresdner  Bank.)  Since  then  as  a  result  of  a  new  understanding  there 
exist  merely  "intimate  business  relations"  which  find  expression  in  the 
fact  that  "  provision  has  been  made  for  the  mutual  representation  on  the 
supervisory  boards  of  either  institution." 

APPENDIX  VIII. 

PROGRESS     OF    CONCENTRATION     WITHIN     EACH    OF    THE 
GREAT    BANKS    AND    WITHIN    THE    BANKS   ALLIED    WITH 
•  THEM    (KONZERNBANKEN). 

Data  for  the  eight  Berlin  great  banks 
TABUS  i. 


End  of  year  — 

Number  of 
establish- 
ments 
(main 
office  and 
branches) 
in  Ger- 
many. 

Deposit 
and  ex- 
change 
offices 
in 
Germany. 

Command- 
ite  con- 
nections 
with 
banking 
houses  in 
Germany. 

Permanent 
participa- 
tions in 
German 
joint 
stock 
banks.  M 

Sum  total 
of  institu- 
tions. 

189? 

18 

!896  

20 

27 

63 

1902  

87 

16 

1905  

46 

149 

I  2 

241 

1908    

69 

264 

Data  for  each  of  the  great  banks, 
TABLE  2. — Darmstddter  Bank. 


x8o< 

1896  

1900  

3 

4 

8 

1902 

8 

1905  

%6 

37  21 

38  r 

39  4 

^6 

1908 

g 

. — Berliner  Handelsgesellschaft. 


1895  

1896  

1900  

1902  

I 

1905  

1908  

1008 


The     German     Great    Banks 


Data  for  the  eight  Berlin  great  banks — Continued. 
TABLE  4. — Commerz-  und  Disconto-Bank. 


1896  

I 

3 
3 
3 
4 

I 
I 

2 

6 
8 
3i 
66 

2 
S 
26 

54 

1902  

1905  

2 

2 

1908 

6 

TABLE  5.  —  Deutsche  Bank. 

1895 

5 
5 
5 
7 
«8 

10 

12 

12 
I? 

35 
44 
73 

17 
i? 
27 
47 
64 
116 

1896  

5 
5 
«n 
3i 

1905    

«  I 
2 

1908  

TABLE  6.  —  Direktion  der  Disconto-Gesellschaft. 

1895  

i 
i 
i 

2 

"3 
6 

i 
i 
i 
5 
8 
16 

i 
i 
3 
3 
ft, 

20 

3 
"     3 
5 

10 

ll 

42 

1896 



1900  

1902  

(45) 

1908  .  •  . 

TABLE  7.  —  Dresdner  Bank. 

1895  

4 
6 

10 

ii 
«I4 

28 

7 
10 
27 
32 
48 
105 

1896 

4 

17 

21 
24 

57 

1902  

I 
I 

48  g 
19 

1908      

90311°— II 65 


1009 


National    Monetary     Commission 

Data  for  the  eight  Berlin  great  banks — Continued. 
8. — Nationalbank  fur  Deutschland. 


End  of  year  — 

Number  of 
establish- 
ments 
(main 
office  and 
branches) 
in  Ger- 
many. 

Deposit 
and  ex- 
change 
offices 
in 
Germany. 

Command- 
ite  con- 
nections 
with 
banking 
houses  in 
Germany. 

Permanent 
participa- 
tions in 
German 
joint 
stock 
banks.35 

Sum  total 
of  institu- 
tions. 

1895  

9 

2 

12 

1896  

1900  

13 

1902 

1905  

(49) 

16 

1908 

9. — A.  Schaaffhausenscher  Bankverein.1 


1895  

2 

1896  

*     2 

1900  

1902  

4 

1905  .  . 

61  10 

1908  

II 

IS 

I 

12 

39 

In  the  subsequent  table  (10)  a  comprehensive  picture  of  the  progress  of 
concentration  is  given  for  those  provincial  banks  which  are  allied  with  one 
of  the  five  Berlin  great  banks,  each  of  which,  as  we  saw,  is  at  the  head  of  a 
bank  group. 

The  41  banks  which  are  part  of  the  community-of-interest  systems  of  the 
great  banks — the  so-called  Konzernbanken,  exclusive  of  subsidiary  banks 
(Tochterbankeri) — show  the  following  development: 


1010 


The     German     Great    Banks 


TABLE  10. 


Group  (Konzern)  of  — 

Branches. 

Agencies. 

Commandites. 

e 

o 

p 

Have 
absorbed. 

Communities  of  interest 
by  ownership  or  ex- 
change of  stock. 

Private  bank- 
ing houses. 

Banks. 

I.  BANK     FUR     HANDEI,     UND 
INDUSTRIE     CDARMSTADTER 

BANK)  ,52 

i.  Breslauer  Discontobank  
2.  Ostbank     fur     Handel     und 
Gewerbe  
3.  Nordwestdeutsche  Bank  

10 

9 
8 

4 

i 

2 

i 

3 

22 
II 

I 

8 

2 
2 

2 

5 

6 
3 

3 
8 

2 

I 
2 

3 

i 

63  2 

4 

4.  Bayerische  Bank  fur  Handel 
und  Industrie  

II.  DEUTSCHE  BANK." 

i.  Bergisch-Markische  Bank  
2.  Schlesischer  Bankverein  
3.  Hannoversche  Bank 

i? 
13 
5 
ii 

2 

4 
13 

3 
3 

3 

S 
i 

4 

13 

8 

2 

(a)  OsnabriickerBank.  .  . 
(6)  Hildesheimer  Bank.  . 
4.  Duisburg-RuhrorterBank.  .  . 
5.  Essener  Kreditanstalt. 

3 

5 

3 



6.  Siegener    Bank    fur    Handel 
und  Gewerbe  

7.  Sachsische  Bank  

8 
3 

6 

i 

8.  Essener  Bankverein  

I 

2 

i 



9.  Oldenburgische      Spar-    und 
Leihbank  

10.  Emder  Bank  

ii.  Privatbank  zu  Gotha  
12.  Mecklenburger  Hypotheken- 
u.  Wechselbank,  with  the.  . 
Mecklenburgische  Spar- 
bank  

3 

i 

i 
13 

i 

63 
79 

2 

i 

2 

I 

I 

3 
6 

13.  Rheinische  Kreditbank65  .  .  .  . 

III.    DlSCONTO-GESELLSCHAKT.56 

i.  Norddeutsche  Bank  

9 

I 

7 

2 

IOII 


National    Monetary     Commission 


TABLE)  10 — Continued. 


Group  (Konzern)  of  — 

Branches. 

Agencies. 

Commandites. 

Deposit  offices 

Have 
absorbed. 

Communities  of  interest 
by  ownership  or  ex- 
change of  stock. 

Private  bank- 
ing houses. 

Banks. 

2.  Allgemeine  Deutsche  Kredit- 
anstalt 

27 
4 

IS 

ii 

i 

6 

(6)  Vogtlandische  Bank  .  . 
(c)  Oberlausitzer  Bank.  .  . 

(d)  Vereinsbank  in  Zwi- 

3    Barmer  Bankverein    

17 

4 

5 

i 

5 
6 

7 



4.  Stiddeutsche  Disconto-Gesell- 
schaft 

6 

I 

IV.  DRESDNER  BANK." 
i    Markische  Bank. 

9 
4 

2 

i 

i 

2.  Rheinische  Bank  
3.  Oberschlesische  Bank  

2 

4.  Wiirttembergische  Landesbank 
5.  Oldenburgische  Landesbank.  . 
6    Mecklenburgische  Bank.  .  .  . 

2 

8 
i 

43 
5° 

26 
26 

3 

(a)  Rostocker    Gewerbe- 
bank,  Aktiengesell- 
schaf  t  
(6)  N  e  uvorpommer'sche 
Spar-  und  Kredit- 
bank  

7.  Landgrafl.  Hessische  konzess. 
Landesbank  

8.  Schwarzburgische  Landesbank 
V.  A.  SCHAAFFHAUSEN'SCHER 

BANKVEREIN.58 

i.  Pfalzische  Bank  

6 

16 
3 
3 

4 

II 

ii 

6 

2.  Mittelrheinische  Bank,  with  the 
MulheimerBank.  . 

3 

Total 

241 

325 

18 

102 

89 

43 

69    16 

1012 


The     German     Great    Banks 


NOTES  TO   APPENDICES  VII  AND  VIII. 

1.  In  alphabetical  order.     The  amounts  of  share  capital  and  surplus, 
unless  otherwise  specified,  are  as  per  Dec.  31,  1908. 

2.  In  the  case  of  commandites,  i.  e.  firms  in  which  a  bank  has  a  silent- 
partnership  interest,  account  is  taken  here  of  the  commandite  interests  in 
banking  firms. 

3.  No  account  is  taken  of  institutions  such  as  the  Bank  fur  Brauindustrie 
(founded  in  1899,  share  capital  7,000,000  marks)  which  are  financing  insti- 
tutions, but  not  banks  proper ;  for  the  same  reason  no  mention  is  made  of 
the  Siiddeutsche  Bodenkreditbank  in  Munich,  founded  in  1871  by  the  Bank 
fur  Handel  und  Industrie,  which  is  represented  on  its  supervisory  board, 
and  of  the  Siiddeutsche  Immobiliengesellschaft  in  Mainz,  on  the  supervisory 
board  of  which  the  parent  bank  is  likewise  represented. 

4.  In  the  beginning  of  1906  the  two  institutions,  with  the  cooperation  of 
the  administration  of  the  royal  private  fortune,  transformed  the  Konigliche 
Wurttembergische  Hofbank,  hitherto  conducted  as  a  partnership  (offene 
Handelsgesellschaft),  into  a  limited  company  with  an  original  capital  of 
10,000,000  marks.     In  1908  the  three  institutions  jointly  transformed  the 
banking  firm  Doertenbachels  in  Stuttgart  into  a  limited  company  with  an 
original    capital    of    4,000,000    marks.     In    1908    the    Wurttembergische 
Vereinsbank  took  over  the  banking  firm  Schlack  &  Fritsch  in  Aalen. 

5.  In  addition  a  premium  of  10  per  cent,  equal  to  2,500,000  marks,  has 
been  paid  in,  which  constitutes  part  of  the  legally  prescribed  surplus. 

6.  This  bank  originated  from  a  transformation  of  the  banking  firm 
Hincke,  Bliithe   &  Meininghaus  and  had  branches  in  Blumenthal  (Han- 
nover), Dortmund,  Osnabriick,  and  Vegesack. 

7.  According  to  its  balance  sheet  as  per  Mar.  31,  1905,  the  Bayerische 
Bank  had  a  capital  of  9,000,000  marks  and  a  surplus  of  76,210  marks 
(13,044  marks  of  reserve)  when  the  firm  was  transformed  into  the  Bayer- 
ische Bank  fur  Handel  und  Industrie.     The  capital  was  reduced  to  8,000,000 
marks  by  an  exchange  of  stock  at  the  rate  of  9  old  shares  for  8  new  ones. 
The  1,000,000  thus  set  free,  together  with  the  existing  surplus  and  the 
undivided  profits  for  the  period  Apr.  i  to  Dec.  31,  1905,  was  used  to  form 
the  new  surplus  and  to  cover  losses  to  be  written  off.     With  the  change 
of  firm  the  business  year  was  changed  to  conform  with  the  calendar  year 
period.     In  the  general  meeting  of  Nov.  20,  1905,  the  capital  was  raised  by 
12,000,000  marks,  so  that  at  present  it  amounts  to  20,000,000  marks.     Of 
the  12,000,000  marks  of  new  shares  1,000,000  were  taken  over  at  the  rate 
of  1 10  per  cent  by  the  Darmstadter  Bank,  6,000,000  were  used  in  taking 
over  the  good  will  of  the  firm  Gutleben  &  Weidert,  while  5,000,000  serve  to 
strengthen  the  operating  resources  of  the  bank. 

8.  No  account  is  taken  in  this  connection  of  the  enterprise  founded  in 
1904-5  under  the  firm  name  of  the  Deutsche-Kolonial-Eisenbahnbau-und 
Betriebsgesellschaft.     Its  object  is  the  construction  and  operation  in  the 
German  colonies  of  railroads,  minor  railways,  and  harbor  facilities.     Since 


10x3 


National    Monetary     Commission 

Apr.  i,  1905,  this  company  has  been  operating  as  a  lessee  the  Usambara 
Railroad  in  German  East  Africa;  in  1905  it  commenced,  for  account  of  the 
Imperial  Government,  the  construction  of  the  Liideritzbucht-Kubub  Rail- 
way (about  130  km.)  in  German  Southwest  Africa.  Neither  is  any  account 
taken  here  of  the  Bank  fur  deutsche  Eisenbahnwerte,  founded  in  1906 
(capital  10,000,000  marks,  of  which  25  per  cent  was  paid  in;  bonds, 
5,000,000  marks). 

9.  No  account  is  taken  here  of  the  Bank  fur  Bergbau  und  Industrie,  the 
shares  of  which  are  partly  owned  by  the  Commerz-und  Disconto-Bank,  for 
the  reason  that  the  former  is  a  financing  company. 

10.  The  Munich  branch  opened  in  1906  deposit  offices  in  Munich  and 
Augsburg,  while  taking  over  the  banking  firm  Bahler  &  Heymann  in  Munich 
and  Augsburg;    the  Dresden  branch  opened  in   1907  a  deposit  office  in 
Meissen,  and  in  1908  one  in  Radeberg  (Saxony). 

11.  The  former  commandite  Guillermo  Vogel  &  Co.  in  Madrid  has  been 
transformed  into  a  branch  of  the  Deutsche  Ueberseeische  Bank  (see  supra. 

P-  439)- 

12.  No  account  is  taken  here  of  institutions,  such  as  the  Bank  fur 
elektrische  Unternehmungen  in  Zurich,  founded  in  1895  with  a  capital  of 
33,000,000  francs,  and  the  Bank  fur  orientalische  Eisenbahnen  in  Zurich, 
founded  in  1896  with  a  share  capital  of  50,000,000  francs,  both  of  them 
being  financing  institutions  and  not  banks  proper. 

13.  In  addition  the  Deutsche  Bank  undertook  the  liquidation  of  the 
Berliner    Bankverein    (1875)    and    of    the    Deutsche    Unionbank    (1876), 
taking  over  at  the  same  time  their  customers.     See  Deutscher  Oekonomist, 
Jan.  27,  1906;    vol.  24,  No.  1205,  p.  35.     With  reference  to  the  La  Plata 
Bank,  see  above  pp.  423  and  433. 

14.  With  reference  to  the  acquisition  of  shares,  a  notable  instance  is  the 
taking  over  of  about  3,000,000  marks  of  newly  issued  shares  of  the  Anhalt- 
Dessauische  Landesbank  of  Dessau  in  1905,  the  capital  stock  of  which  was 
increased  by  this  issue  to  12,000,000  marks  (see  p.  993,  sub.  a).     In  1906 
the  shares  of  the  Braunschweigische  Privatbank  and  of  the  Wurttember- 
gische  Vereinsbank  were  newly  acquired,  while  the  share  holdings  in  the 
Niederlausitzer  Kredit-und  Sparbank  were  increased. 

15.  The  firm  of  David  Daniel,  of  Celle,  which  had  formerly  been  a  com- 
mandite of  the  Hannoversche  Bank,  was  made  a  branch  of  that  bank, 
which  relinquished  its  commandite  interests  in  the  firms  of  Menz,  Bloch- 
mann  &  Co.,  Dresden;  H.  J.  Kledwig  &  Reibstein,  Gottingen;  and  Reibstein 
&  Co.,  Miinden. 

1 6.  The  Duisburg-Ruhrorter   Bank  became  a  branch  of  the   Essener 
Kreditanstalt  in  the  middle  of  1909. 

17.  The  Deutsche  Bank  in  1904  (effective  Jan.  i,  1905)  took  over  a  new 
stock  issue  of  1,000,000  marks  (nominal)  of  the  Oldenburgische  Spar-  und 
Leihbank.     Unlike  the  old  shares,  these  have  not  thus  far  been  listed  on 
the  stock  exchange 


1014 


The     German     Great     Banks 

1 8.  Under    the    direction    of    the    Mecklenburgische    Hypotheken-und 
Wechselbank,  there  was  founded  in  1906  the  Mecklenburgische  Treuhand- 
gesellschaft  m.  b.  H.  (share  capital,  1,000,000  marks),  with  office  inSchwerin. 

19.  Among  stock  acquisitions  for  the  last  few  years  we  mention  300,000 
marks  nominal  of  new  shares  of  the  Geestemtinder  Bank,  in  1906 — an  issue 
by  which  the  capital  of  this  bank  was  increased  to  1,300,000  marks,  and 
300,000  marks  of  shares  of  the  Bayerische  Bodenkreditanstalt  of  Wurzburg. 

20.  The  Mannheim  branch  in  1906  opened  a  deposit  office  in  Freiburg 
i.  B.,  which  took  the  place  of  the  firm  of  Ed.  Kauffmann  &  Fehr,  acquired 
by  it. 

21.  We  disregard  here  institutions,  which  the  Dresdner  Bank  helped  to 
organize,  such  as  the  Bank  fur  orientalische  Eisenbahnen  in  Zurich,  or  the 
Zentralbank  fur  Eisenbahnwerte  in  Berlin,  capital  stock  6,000,000  marks, 
these  being  financing  institutions,  but  not  banks  proper.     For  the  same 
reason  we  ignore  the  General  Mining  and  Finance  Corporation  Limited, 
of  London,  capital  £1,250,000,  an  institution  in  which  the  Dresdner  Bank 
is  heavily  interested. 

22.  For  an  account  of  the  Deutsche  Orientbank  founded  jointly  by  the 
Dresdner  Bank,  the  A.  Schaaffhausen'scher  Bankverein,  and  the  National- 
bank,  see  p.  1005  under  the  head  of  Nationalbank  fur  Deutschland. 

23.  The  permanent  investments  in  the  stock  of  the  Eisenbahnbank,  and 
the    Eisenbahnrentenbank    of    Frankfort-on-the-Main    are    here    ignored, 
as  these  are  financing  institutions,  but  not  banks  proper. 

24.  See  above  note  20.     In  addition,  the  Dresdner  Bank  in  1906   took 
over  all   the   assets  of    the    Zwickauer   Gewerbebank,   which  went  into 
liquidation. 

25.  I  assume  that  there  exists  at  least  an  agreement  of  regulating  the 
mutual  relations  of  the  Dresdner  and  the  affiliated  banks,  numbered  5  to 
8,  inclusive. 

26.  In  1905   10,000,000  marks  additional  stock  was  issued,  raising  the 
former   capitalization   to    21,000,000   marks.     Of   the   new   issue   the   A. 
Schaaffhausen'scher  Bankverein  took  6,000,000  at  par  as  a  permanent 
participation.     At  the  same  time  on  July  i,  1905,  it  handed  over  the  busi- 
ness of  its  branch  in  Essen  to  the  Rheinische  Bank.     A  former  director 
of    the    A.  Schaaffhausen'scher  Bankverein  took  over    the    management 
of  the  Rheinische  Bank  and  members  of  the  board  of  managers  (Vorstands- 
mitglieder)    of   the   Schaaffhausen'scher    Bankverein   took    seats   on    the 
supervisory  board  of  the  Rheinische  Bank,  as  did  also  the  chairman  of  the 
supervisory  board  of  the  Mittelrheinische  Bank.     The  Rheinische  Bank 
in  turn  took  over  in  1906  2,000,000  marks  nominal  of  stock  of  the  Bank- 
verein Gelsenkirchen  of  Gelsenkirchen  (with  a  branch  in  Wattenscheidt), 
in  the  establishment  of  which  it  had  shared. 

27.  .The  banks,  numbered  5  to  8,  may  perhaps  better  be  regarded  as 
affiliated  with  the  Dresdner  Bank  by  contract  rather  than  through  stock 
ownership.     In  the  case  of  these  banks  the  community  of  interest  is  based 


1015 


National    Monetary     Commission 

for  the  time  being  on  permanent  stock  holdings  of   the  Dresdner  Bank, 
and  not  upon  the  mutual  exchange  of  stock. 

28.  The    Mitteldeutsche    Kreditbank,    Frankfort-on-the-Main,    founded 
1856,    capital    stock    (since    1905)    54,000,000   marks;    surplus    (approxi- 
mately), 6,400,000  marks.     It  has  6  branches,  located  as  follows:  Berlin, 
Essen,    Fiirth,   Giessen,   Nuremberg,    Wiesbaden,   and    3   commandites — 
Meyer  &  Diss,  Baden-Baden,  the  Kommanditgesellschaft  Bernard  Wein- 
mann,  Munich,  and  Weiss  Herz  &  Co.,  Mayence.     Since  1899  it  opened 
22  deposit  offices  (13  in  Berlin  and  Charlottenburg,   i  in  Pankow,  4  in 
Frankfort-on-the-Main,   i  in  Hochst,   i  each  in  Marburg,  Offenbach,  and 
Wetzlar.     It  has  2  agencies  (in  Biidingen  and  Butzbach).     It  has  absorbed 
the  following  firms; 

1898,  B.  Berle,  Wiesbaden. 

1899,  S.  Pflaum  &  Co.,  Nuremberg  &  Fiirth. 

1906,  Arthur  Andreae  &  Co.,  Frankfort-on-the-Main;  Aron  Heichel- 
heim,  Giessen;  Moritz  Heertz,  Wetzlar;  Hermann  Wertheim,  Marburg. 

1907,  North,  Kammeier  &  Co.,  Essen  (formerly  a  commandite  of 
the  Mitteldeutsche  Kreditbank). 

1909,  Otto  Goebel,  Fulda  (acquired  to  serve  as  a  deposit  office). 
Gebr.  Fiirth  &  Co.,  Hanau  (acquired  to  serve  as  a  branch). 

In  conjunction  with  the  Disconto-Gesellschaft,  the  Allgemeine 
Deutsche  Kreditanstalt,  and  the  former  banking  firm  of  B.  M.  Strupp 
of  Meiningen  (see  p.  996),  the  Mitteldeutsche  Kreditanstalt  established 
as  a  subsidiary  the  Bank  fur  Thuringen  formerly  B.  M.  Strupp  A.  G., 
Meiningen  (share  capital  10,000,000  marks,  of  which  5,000,000  marks 
were  paid  in.)  The  latter  has  twelve  branches  (in  Eisenach,  Franken- 
hausen,  Gotha,  Hildburghausen,  Jena,  Neustadt  (Orla),  Ruhla,  Sal- 
zungen,  Saalfeld,  Sonneberg,  Apolda,  and  Possneck.  It  has  absorbed 
the  former  Meiningen  branch  of  the  Mitteldeutsche  Kreditbank,  the 
banking  firms  B.  M.  Strupp  and  Hermann  Lobe  at  Meiningen  (the 
latter  since  January  i,  1906),  also  the  banking  firms  J.  G.  Bohme  & 
Sohn  at  Apolda,  and  Richard  Eberlein  at  Possneck. 

29.  No  account  is  taken  here  of  the  Bank  fiir  elektrische  Unternehmungen 
in  Zurich,  founded  in  1895  with  the  cooperation  of  the  Nationalbank. 

30.  In  the  same  year  (1905)  the   Wiener  Bankverein   opened  a  branch 
in  Constantinople. 

31.  In  1907  the  Nationalbank  took  over  the  clientele  of  the  dissolved 
firm  Strauss,  Thalmessinger  &  Co.  in  Berlin. 

32.  The  former  branch  in  Essen    passed   over  since  July    i,   1905,  to 
the  Rheinische  Bank  (see  p.  1015,  note  26). 

33.  No  account  is  taken  here  of  institutions  such  as  the  Bank  fiir  Deutsche 
Eisenbahnwerte   (share  capital,    10,000,000  marks),   founded  by   the   A. 
Schaaffhausen'scher  Bankverein  in  conjunction  with  other  concerns,  the 
former  being  a  financing  institution,  but  not  a  bank  proper. 

34.  See  at>ove  p.  1015,  note  26,  regarding  the  relations  of  the  A.  Schaaff- 
hausen'scher Bankverein  to  the  Rheinische  Bank. 


10x6 


The     German     Great    Banks 


35.  No  account  is  taken  here  of  the  German  oversea  banks,  nor  of  the 
mortgage  and  brokers'  banks.     Institutions  in  which  several  great  banks 
participate  are  counted  in  the  table  only  once. 

36.  Moreover  6  agencies;  no  branches  in  foreign  countries. 

37.  The  deposit  office  in  Rostock  has  been  taken  over  by  the  Vereins- 
bank  in  Wismar. 

38.  The  Bucharest  commandite  has  been  transformed  (in  1904-5)^0 
a  stock  company,  but  does  not  figure  in  the  table  for  the  reason  that  it  is  a 
foreign  bank.     A  new  commandite,  Fuld  &  Co. ,  in  Pforzheim,  was  founded 
in  1905;  the  commandite  in  Dresden,  on  the  other  hand,  was  relinquished 
in  1905. 

39.  No  account  is  taken  here  of  the  permanent  participations  in  foreign 
stock  companies:  The  Wechselstuben-Aktiengesellschaft  Merkur,  in  Vienna, 
the  Banca  Marmorosch  Blank  &  Co.,  in  Bucharest,  and  the  Bankers'  Trading 
Syndicate,  in  London. 

40.  No  account  is  taken  here  of  the  permanent  participation  in  the  Lon- 
don andHanseatic  Bank  (19,302  shares,  at£io,  paid  in,  equal  to  £193,020), 
the  latter  being  a  foreign  company. 

41.  Moreover  an  agency  in  London. 

42.  Moreover  two  commandites  in  foreign  countries  of  which  no  account 
is  taken  here. 

43.  Account  is  taken  only  of  participations  in  the  shape  of  stock  owner- 
ship (see  above,  p.  988  et  seq.).     No  account  is  taken  in  this  and  the  other 
tables  of  communities  of  interest,  concluded  in  turn  by  each  of  the  13  allied 
banks  (Konzernbanken).     The  former  are  shown  on  p.  ion  and  for  each  of 
the  bank  groups  in  Table  10,  last  column.     Neither  is  any  account  taken  of 
the  participation  in  the  Zentralamerika-Bank  Aktiengesellschaft,  although 
it  has  its  main  office  in  Berlin. 

44.  Moreover  an  agency  in  London. 

45.  One  commandite  in  a  foreign  country. 

46.  No  account  is  taken  of   the  stock  participation  in  the  Rheinisch- 
Westfalische  Disconto-Gesellschaft. 

47.  Moreover  an  agency  in  London. 

48.  No  account  is  taken  of  the  stock  participation  in  the  Eisenbahnbank 
and  Eisenbahnrentenbank  in  Frankfort-on-the-Main,  which  are  financing 
institutions  but  not  banks  proper,  nor  of  the  stock  participation  in  the 
foreign  stock  company,  Speyr  &  Co.,  in  Basle,  etc.     Neither  do  the  figures 
include  the  stock  participations  in  the  Orientbank  and  in  the  Deutsch- 
Sudamerikanische  Bank,  though  the  latter  has  its  central  office  at  Berlin. 

49.  No  account  is  taken  of    the  stock  participation   in  the  Deutsche 
Orientbank,  although  the  latter  has  its  main  office  in  Berlin. 

50.  The  communities  of  interest  entered  into  by  the  absorption  of  the 
banking  house  von  Erlanger  &  Sohne  (see  above  p.  1001,  sub.  a-  d)  have 
been  enumerated  under  the  head  of  the  Dresdner  Bank,  which  took  them 
over  jointly  with  the  A.  Schaaffhausen'scher  Bankverein.     No  account  is 
taken  here  of  the  stock  ownership  in  the  Deutsche  Orientbank  and  the 
Deutsch-Sudamerikanische  Bank. 


1017 


National    Monetary     Commission 

51.  The  branch  Essen  has  been  dropped  (taken  over  by  the  Rheinische 
Bank). 

52.  The  Darmstader  Bank  group  includes  also  the  domestic  subsidiary 
company,  Wiirttembergische  Bankanstalt  vorm.  Pflaum  &  Co.,  which  has  a 
contractual  community  of  interest  with  the  Wurttembergische  Vereinsbank. 

53.  In  1905  the  Ostbank  fiir  Handel  und  Gewerbe  absorbed  the  Ost- 
deutsche  Bank  vorm.  J.  Simon  Wwe.  &  Sohne  in  Konigsberg.     The  latter 
had  2  branches  and  had  absorbed  2  private  banking  firms. 

54.  No  account  is  taken  here  of  domestic  subsidiary  companies  (Tochter- 
gesellschaften)  doing   business  within  the  country  and   belonging  to  the 
Deutsche  Bank  group,  viz,  the  Deutsche  Treuhand  Gesellschaft  and  the 
Braunschweiger  Privatbank  Aktiengesellschaft  in  Brunswick,  founded  in 
1905  by  the  Hannoversche  (Osnabriicker  und  Hildesheimer)  Bank  through 
the  transformation  of  the  banking  firm  Ludwig  Peters  Nachf. 

55.  The  Oberrheinische  Bank  (vorm.  Koster  &  Co.),  taken  over  in  1904 
by   the   Rheinische   Kreditbank,    had   9    branches,    2    commandites,    one 
deposit  office,  had  absorbed  6  private  banking  firms,  and  jointly  with  the 
Deutsche  Bank  had  a  community  of  interest  through  stock  ownership  with 
the  Siiddeutsche  Bank  in  Mannheim. 

56.  The    Rheinisch-Westfalische    Disconto-Gesellschaft    (share    capital 
80,000,000  marks)  is  no  longer  included  among  the  Disconto-Gesellschaft 
group.     At  the  end  of  December,  1905,  it  had  14  branches,  2  commandites, 
3  deposit  offices,  had  absorbed  2  private  banking  firms  and  7  banks,  and 
has  communities  of  interest  through  stock  ownership  with  5  other  banks. 
The  Disconto-Gesellschaft  group  has  been  augmented  by  the  accession  of 
the  following  domestic  subsidiary  companies:     The  Bayerische  Disconto- 
und  Wechselbank  in  Nuremberg  with  3   branches  and  4   deposit  offices, 
which  has  absorbed  5  private  banking  firms  (see  p.  995);  the  Bank  fiir  Thii- 
ringen  vorm.     B.  M.  Strupp,  Aktiengesellschaft  in  Meiningen,  which  has  8 
branches  and  in  turn  has  absorbed  4  private  banking  firms  as  well  as  the 
Meiningen  branch  of  the  Mitteldeutsche  Kreditbank  (see  p.  996) ;  and  the 
Revisions-  und  Vermogens-Verwaltungs-Aktiengesellschaft  in  Berlin  with 
2  branches  (see  ibid.). 

57.  The  Dresdner  Bank  group  comprises  also  the  domestic  subsidiary 
company.  Treuhand- Vereinigung,  Aktiengesellschaft,  in  Berlin  (see  p.  1000). 
The  Deutsche  Genossenschaftsbank  Sorgel,  Parrisius  &  Co.,  taken  over  by 
the  Dresdner  Bank,  had  absorbed  2  private  banking  firms  (see  above,  p.iooo). 

58.  The  Ostdeutsche  Bank  vorm.  J.  Simon  Wwe.  &  Sohne  in  Konigsberg 
(which  had  2  branches  and  had  absorbed  2  banking  firms),  taken  over  in 
1905  by  the  Ostbank  fiir  Handel  und  Gewerbe  in  Posen  (which  belongs 
to  the  Darmstadter  Bank  group)  no  longer  belongs  to  the  A.  Schaaffhausen'- 
scher  Bankverein  group.     The  Ostbank  fiir  Handel  und  Gewerbe  belongs  now 
simultaneously  to  the  Darmstadter  Bank  and  to  the  Bankverein  groups. 

59.  The  smaller  number  of  communities  of  interest  (16  instead  of  20, 
given  as  per  Dec.,  1904,  on  p.  2 1 1  of  the  first  edition  of  this  work)  is  accounted 
for  by  the  elimination  of  the  6  communities  of  interest  of  the  Rheinisch- 
Westfalische  Disconto-Gesellschaft  and  the  accession  of  two  new  ones. 


1018 


INDEX. 

A.   Schaaffhausen'scher    Bankverein.     See    Schaaffhausen 'scher        Page. 
Bankverein. 

Aachener  Hiitten-Aktienverein  Rote  Erde 483,  733-734 

Absorption  of  provincial  banking  concerns  by  the  great  banks, 

causes ' 658-660 

Acceptances : 

Amounts  for  all  the  larger  credit  banks  and  share  of  the  total 

bill  circulation  of  these  banks 289 

Amounts  for  each  of  the  great  banks 285 

Amounts  held  by  German  banks 279 

In  wholesale  trade  and  industry 277 

Per  cent  share  of  total  loans  of  the  larger  credit  banks 285 

Renewal  of  industrial  acceptances,  and  dangers  to  the  banks .  283 

Speculative,  used  by  bankers  for  stock  exchange  operations .  .  284 

Replaced  by  cash  dealings 277 

Use  in  over-sea  trade 287 

Accommodation  bills 213,  214 

Actiengesellschaft  der  Orientalischen  Eisenbahnen 434,  445,  494 

Agencies  of  banks: 

Disadvantages 696  et  seq. 

Distinguished  from  branches 696 

Number 697,  and  Appendix  VIII 

Agreements  among  German  shipping  companies 139 

Agreements,  international,  between  German  and  American  ship- 
ping companies 137  et  seq. 

Agreements,  international,  for  the  mutual  clearing  of  postal  checks 

and  transfers 147 

Agricultural  credit  and  the  Reichsbank 107 

Agricultural  credit,  special  organizations  for  the  granting  of 224 

Agricultural  population,  relative  decrease  of 104, 105, 108 

Agriculture : 

Growth  of  population,  and  deficit  in  agricultural  production.  .   109,  no 

Improvement  and  growth  of 105,  106 

Protection  of 106 

Aktiengesellschaft  fur  Anilinfabrikation  in  Treptow 721 

Aktiengesellschaft  fur  iiberseeische  Bauunternehmungen 438 

Aktiengesellschaft  fur  Verkehrswesen 513,  525 

Allgemeine  Deutsche  Kreditanstalt,  capital 641 

Allgemeine  Elektrizitatsgesellschaft  group 715 

Allgemeine  Elektrizitatsgesellschaft  group,  affiliated  banks 416,  717 

Allgemeine  Elektrizitatsgesellchaft  absorbs]the  Union  Electric  Co. .  718 

1019 


National     Monetary     Commission 

Page. 

Allgemeine  Elektrizitatsgesellschaft,  formation 714 

Allgemeine  Lokal-  und  Strassenbahngesellschaft 524 

Amerika-Bank 448,  507 

Amsterdamsche  Bank 449,  503 

Anatolian  Railway  Co 434,  445,  474,  494 

Andreevics  &  Co.  in  Belgrade 451,  526 

Arbitrage  business 621 

Assets,  quick,  proper  proportion  to  liabilities 13 

Avale  (surety  bills) 262,  265 

Badische  Anilin-und  Sodafabrik 721 

Bagdad  Railway:  Participation  of  the  great  banks 437,  474 

Balance  of  payments: 

Credit  items 532  et  seq. 

Credits  granted  to  foreign  traders 536 

Earnings  from  oversea  shipping 540 

Investments  in  foreign  securities  and  enterprises. .   534,  536,  541  et  seq. 

Minor  credit  items 541 

Oversea  banking 538 

Tourists'  expenditures 541 

Improvement  of ,  main  causes 113 

Banca  Commerciale  Italiana. . . .  436,  441,  445,  451,  453,  456,  487,  494,  511,  525 

Banca  Commerciale  Italiana,  branches 687 

Banca  Commerciale  Tunisiana 456 

Banca  Generala  Romana:  Capital,  dividends,  and  branches 442,  487 

Banca  Marmorosch  Blank  &  Co 449,  450,  451,  506,  526 

Banco  Mejicano  de  2omercio  e  Industria.     See  Mexikanische  Bank 

fur  Handel  und  Industrie. 
Bank  acceptances      See  Acceptances. 
Bank  checks: 

Inquiry  of  the  Central  Association  of  German   Banks  and 

Bankers 2 18 

Means  of  concentration  of  credit  at  the  banks 215,  216 

Use  of 217 

Bank  clearances  in  principal  financial  centers,  1884  and  1907 148 

Bank  employees  as  affected  by  concentration  in  banking 765  et  seq. 

Bank  employees,  number 765-766 

Bank  employees,  salaries 769-770 

Bank  employees,  social  insurance 768-769 

Bank  employees,  standing  and  prospects 766-768 

Bank  fiir  Chile  und  Deutschland.     Capital,    branches,    and   divi- 
dends   441,  487 

Bank  fiir  Deutsche  Eisenbahnwerte 513,  524 

Bank  fiir  Handel  und  Industrie.     See  Darmstadter  Bank. 

Bank  fiir  Orientalische  Eisenbahnen 436, 445, 474 

Bank  fiir  Siiddeutschland  (Hessian  1^:3  Bank) 504 

1020 


The     German    Great     Banks 


Page. 

Bank  fiir  Thuringen 671 

Bank  notes: 

Average  circulation  of  leading  banks 150 

Note  reserves  of  leading  banks  of  issue 151 

Bank  of  England  discounts  at  the  market  rate,  to  meet  the  com- 
petition of  the  joint-stock  banks 574-575 

Bank  statements,  periodic  publication  may  lead  to  more  uniform 

methods  in  their  compilation 594 

Bank  syndicates: 

Definition  and  origin 408 

For  the  underwriting  of  domestic  and  foreign  loans 414 

Group  for  Asiatic  business ' 412 

Group  for  Russian  loans 414 

Industrial  groups 415 

Prussian  syndicate,  history  and  present  composition 409 

Rothschild  syndicate,  history  and  present  composition 412 

For  underwriting  the  loans  of  the  Empire,  composition  of 410 

Bankers'  Trading  Syndicate  (London) 447,  506 

Banking  business,  regular  or  current,  definition  of 2 

Banking,  private,  in  Germany  before  1870 39,  40 

Banks: 

Advisers  of  the  investing  public 9 

Functions  of  public  or  national  character,  performed  by n 

Issue  of  securities 10 

Leading  functions 2  et  seq. 

Part  played  in  the  industrial  progress  of  the  nation 221 

Regulators  of  credit ) 9 

Transforming  private  concerns  into  stock  companies 10 

Of  issue,  in  Germany , 141-142 

Banque  de  Credit  at  Sophia,  Bulgaria 443,  487 

Banque  d'Orient i 454 

Banque  Internationale  de  Bruxelles 442,  450,  451,  453,  506,  511 

Banner  Bankverein: 

Capital 641 

Concentration 633 

Bayerische  Bank  fiir  Handel  und  Industrie 506 

Bayerische  Disconto-  und  Wechselbank 670 

Bayerische  Handelsbank,  concentration 632-633 

Bayerische  Vereinsbank,  concentration 632 

Bergisch-Markische  Bank 473,  616,  641,  646 

Berliner  Handelsgesellschaft,  founding 47 

Amount  of  acceptances  held  at  the  end  of  1895  to  1908 286 

Business  operations  prior  to  1870 75  et  seq. 

Capital 517  et  seq. 

Connections  in  New  York  and  Amsterdam 451 

Dividends 77,  518-521 

102 1 


National    Monetary     Commission 

Berliner  Handelsgesellschaft — Continued.  Page. 

Foreign  participations 525,  526 

Increase  of  capital  stock 657 

Industrial  connections 374 

Industrial  issues  effected 525 

losses 344,  5*8,  5*9>  S2o 

Participations 450, 451 

Railway  business 519,  524 

Ratio  of  own  resources  to  liabilities 560 

Relations  to  the  electro-technical  industry 522 

Relations  to  the  "heavy"  industries  (coal,  iron,  etc.) 523 

Scope  of  activities,  as  defined  in  its  constitution 517 

Berufsgenossenschaften.     See  Trade  insurance  associations. 
Bills: 

Amount  held  by  the  Reichsbank 158,  297 

Amount  held  by  all  credit  banks 295 

Amount  held  by  the  larger  credit  banks 296 

Amount  held  by  the  six  great  Berlin  banks,  1898  to  1908 296 

Amount  outstanding  and  relation  to  the  resources  of  the  eight 

Berlin  great  banks,  1883  to  1908 288 

Decline  in  the  amount  of  bills  discounted  by  English  banks.  .   297,  298 

Number  increases  during  boom  periods 282 

Per  cent  share  of  the  assets  of  the  credit  banks  invested  in  bills .   274-275 

"Boarding-out"  of  finance  bills 213,  278 

Bochumer  Verein 510 

Bohemian  Industrial  Bank 253 

Borsig  works 737,  738 

Bourse :  Importance  of  a  strong  bourse  for  the  security  business . .  .  406 

Brasilianische   Bank  fur   Deutschland:  Capital,    dividends,    and 

branches 440,  441 

Braunschweiger  Privatbank 671 

Branch  banking: 

Differences  between  Germany  and  other  countries 687-688 

Difficulties  of  effective  supervision 693 

In  England  and  Wales 684-685 

In  France 686 

In  Germany — 

Advantages  and  drawbacks 688  et  seq. 

Causes  of  slow  development 695 

General  instructions  by  the  home  office 692-693 

In  Scotland 686,  688 

Branch  banks.     Relations  to  the  central  office 689  et  seq. 

Brokerage:  Lowering  of  rates  due  to  legislation 620 

Brokerage  business: 

Definition  of,  in  the  German  Commercial  Code 323 

Extent 334 


1022 


The. German    Great     Banks 


Brokerage  business — Continued.  Page. 

General  rules  followed  by  the  banks 328 

Of  German  banks.     Important  instances 323 

Right  of  pledge  or  retention 329 

Waiver  of  itemized  statement 331 

Cable  and  Telegraph  Companies:  Participation  of  the  great  banks.          437, 

442,  448,  450,  453, 459,  494,  5°7>  511?  526 

Call  money 310 

Capital  invested  in  banking  during  the  period  1851-1870 187 

Capital  of  the  large  banks  in  1870 188 

Capital,  per  capita  distribution  in   Prussia  and   England  about 

1845,  estimated 28 

Capital,  popular  conception  of 1-2 

Capital  power  of  the  great  banks 642  et  seq. 

Cartel  inquiry,  1902-1905 170  et  seq. 

Cartels: 

Causes  of  formation 168 

Criticism  of  price  policy 172  et  seq. 

Definition 167 

Distinction  from  trusts 167 

Number  of,  by  industries 169 

Cassella  &  Co. :  Fusion  with  the  Hochst  Dye  Works 708,  721  et  seq. 

Cash  on  hand  at  German  credit  banks 569 

Census  of  occupations,  1882  and  1895.     Comparative  results 102 

Central-Amerika  Bank 474 

Centralbank  fur  Eisenbahnwerte 495 

Central  bank  for  foreign  commandites  proposed 502,  680 

Central  credit  bureau :  Difficulties  in  the  way  of  organizing  such 

an  institution 244 

Central  institution  for  long-term  credit:  Objections  to 251  et  seq. 

Check  accounts 264 

Chemical  industry: 

Combinations  in  the 721  et  seq. 

General  scheme  of  development. 752-753 

Growth  of 125, 126 

Cities,  population  of  principal,  about  1850 34 

City  of  Glasgow  Bank 214,  215 

Coal  output,  growth  of,  in  principal  countries 122 

Coal,  production  of,  in  1850  and  1900 32 

Coal  syndicate,  renewal  through  the  influence  of  the  banks 735 

Coinage,  systems  of,  in  Germany,  before  1870 39 

Combination   of   iron    and    steel    works   with    mining   concerns, 

instances 706  et  seq. 

'Commandites,  advantages  and  disadvantages 681  et  seq. 

Commercial  treaties:  Favorable  effect  upon  domestic  agriculture. .  185 


1023 


National    Monetary     Commissio 


n 


Commerz-  und  Disconto-Bank :  Page. 

Capital 641 

Increase  of  capital  stock 658 

Ratio  of  own  resources  to  liabilities 560 

Commissions  earned  by  the  larger  banks,  and  ratio  to  gross  profits. .  335 

Communities  of  interest — 

Among  German  banks 664  et  seq. 

Between  banks  in  Rhineland-Westphalia 666 

Between  banks  in  Upper  Silesia 666 

Means  of  effecting 667  et  seq. 

Community  of  interest  through  exchange  of  stock:  Advantages. .  678 

Companies,  joint  stock: 

Average  dividends  of  shareholders  during  1870-1900 120 

Distribution  by  industries,  of  companies  founded  during  1870- 

1874 116, 117 

Flotations  1871-1908 118-119 

Growth  of 115-118 

In  Prussia  before  1850  and  after 38 

Comptoir  National  d'Escompte:  Agencies  and  branches 686 

Concentration  movement: 

Harm  likely  to  be  done  by  legislative  interference 778 

Importance  of  the  joint-stock-company  form  of  organization .  605  et  seq. 

Of  provincial  banks 628 

Universal  aspects 602  et  seq. 

Successive  stages 751  et  seq. 

Concentration  of  banking: 

Advantages 754 

By  agreement^    Disadvantages 674-677 

By  means  of  fusion 660  et  seq. 

By  means  of  increase  of  capital 656  et  seq. 

Causes 606  et  seq. 

Commandites 680  et  seq. 

Dangers 758,  759 

Disadvantages 764 

Drift  toward  Berlin  of  provincial  banks 653  et  seq. 

Effects  of  commercial  crises 635  et  seq. 

Effects  on  the  bank  employees 765  et  seq. 

Effects  on  the  stock  exchange 771-772 

Formation  of  cartels  in  the  nineties 614 

Fostered  by  legislation : 618  et  seq. 

Importance  of  bank  fusions  in  British  banking 662-663 

Importance  of  the  notation  business 608  et  seq. 

In  France 664 

In  Germany  has  not  reduced  cost  of  operation 757~758 

In  the  United  States 664 

Inherent  tendency  toward  concentration  in  banking  capital .  613  et  seq. 


1024 


The     German    Great     Banks 


Concentration  of  banking — Continued.  Page. 

Limitations  to  the  increase  of  capital  stock 607 

Liquidations  of  banks  after  the  panic  of  1873 614,  636  et  seq. 

Local  at  Berlin 653  et  seq. 

Prospective  development 753~754 

Through  absorption  of  banking  firms  and  fusion 658  et  seq., 

Appendix  VIII 

Through  acquisition  of  shares 672 

Through  agreement 673 

Through  communities  of  interest 664  et  seq. 

Through  exchange  of  stock 677 

Through  the  founding  of  branches 684  et  seq.,  Appendix  VIII 

Through  the  founding  of  deposit  offices 699  et  seq. 

Through  the  opening  of  agencies 696 

"  Concern  "  banks 658-659 

Consuming  power,  growth  of 113 

Corporation,  factor  in  the  concentration  movement 751 

Credit: 

Amount  of,  granted  on  rural  and  urban  real  estate  in  Prussia . .  224 

Central  institution  for  long-term  credit,  as  proposed  by  Felix 

Hecht 240  et  seq. 

Discrimination  by  the  banks  in  favor  of  trade  and  industry, 

as  against  agriculture 223 

Excessive  demand  for,  preceding  a  crisis 17 

Lack  of  general  principles  shown  by  the  banks  in  the  granting 

of 222,  229,  230 

Long-time  industrial 241  et  seq. 

Secured  versus  unsecured 269,  270,  271 

Credit  banks: 

Aggregate  capital  in  1872 188 

Amounts  written  off,  1883  to  1908 468 

And  industrial  credit 242 

Attitude  toward  the  small  traders 225 

Coefficient  of  liquidity 565 

Commissions 465 

Credit  extended  to  agriculture  by 224,  225 

Dividends,  1885-1908 460  et  seq. 

Expenses  of  operations,  1883-1908 467 

Gross  and  net  earnings,  1885-1908 460,  461,  465 

Opposition  to  their  business  policy 547-548 

Ratio  of  liabilities  to  own  resources 559  et  seq. 

Review  of  adverse  criticism  of  the 232  et  seq. 

Surplus  funds,  1885-1908 469 

Credit  Lyonnais,  agencies  and  branches 686 


1025 


National    Monetary     Commission 


Credit  mobilier:  Page. 

Attitude  toward  subsidiary  companies 53~54 

Causes  of  failure 52 

Character  of  business  reports 53 

Dividend  policy 52 

Government  control 54  et  seq. 

Origin  and  program 49  et  seq. 

Credito  Italiano 453,  687 

Creditor  industries 712-713 

Crises: 

Bffectsof  commercial  crises  on  concentration  of  banking.  .  . .  635  et  seq. 

Definition  of 16 

Intervention  of  banks  after  the  outbreak  of 20-21 

Prognostication  of 16 

Symptoms  of  approaching 17  et  seq. 

Of  1857 59 

Of  1857,  attitude  of  banks 81  et  seq. 

Of  1873— 

Failures  and  liquidation  of  companies 116 

Failures  and  liquidation  of  banks 188,  636 

Current  account  business: 

Advantages  to  the  banks 271  et  seq. 

Calculation  of  interest 266 

Commissions  charged  by  German  banks 266 

Importance  in  the  general  banking  business 259  et  seq. 

Index  of  business  conditions 272 

Leading  features 261 

Leading  to  concentration  in  banking 273 

Methods  of  the  credit  banks  in  securing  an  approximate  equi- 
librium between  credits  and  debits 267,  268 

Number  of  accounts  at  the  Deutsche  Bank  in  1908 268 

Number  of  accounts  at  the  Dresdner  Bank  in  1907  and  1908 .  .  268-269 

Current  account  credit,  security  for 269 

Customs  Union,  German.     See  Zollverein. 

Darmstadter  Bank: 

Absorption  of  provincial  banking  concerns 660 

Amount  of  acceptances  held  1895  to  1908 286 

Amount  of  loans  on  collateral,  including  reports 322 

Business  policy 67  et  seq.,  498 

Capital 66,  645 

Classification  of  securities  held 403 

Commandites 60-61,  448,  449,  503,  680 

Commandites  in  New  York,  Paris,  and  Vienna 502 

Communities  of  interest 506 

Deposits 69,  71,  208 


1026 


The     German    Great    Banks 


Darmstadter  Bank — Continued.  Page. 

Distinguished  from  the  Credit  Mobilier 56  et  seq.,  68 

Dividends 67-68,  503  et  seq. 

Early  flotations  and  transformations 340 

Early  program  of 48, 49 

Increase  of  capital  stock 657 

Foreign  business 501 

Foreign  connections 506 

Industrial  connections 375,  493 

Interest  receipts  from  commandite  investments 683 

Losses  from  foreign  business 504-505 

Member  of  the  Rothschild  syndicate 412,  450 

Offices  in  Krankfort-on-the-Main  and  Mainz 501 

Origin 46 

Participation  in  African  mining  business 450 

Participation  in  railway  transactions  before  the  seventies 64,  65 

Railway  business  during  recent  years 503 

Ratio  of  own  resources  to  liabilities 560 

Subsidiary  banks 503-504 

Underwriting  of  State  and  municipal  loans  before  1870 62 

Group,  capital  power 645 

Debtor  industries 712-713 

"Deports" 313*  3*4 

Deposit  bank,  central :  Impracticability  of  the  scheme  proposed  by 
Caesar  Straus 573  et  seq. 

Deposit  banks,  imperial  and  State:  Criticism  of  the  Warschauer 
proposal 574  et  seq. 

Deposit  business: 

Obstacles  to  growth  in  Germany 193 

Rules  of  the  Deutsche  Bank 206 

Deposit  offices: 

Advantages 700 

Growth  of 699,  Appendix  VIII 

Organization 699 

Promotion  of  speculative  dealings  in  securities 325 

Depositen.    See  Deposits. 

Deposits:  Alleged  unsafety  of 549 

Deposits  at — 

All  Berlin  banks,  1889-1908 209 

Cooperative  credit  associations 199 

Credit  banks,  character  and  composition  of 236  et  seq. 

Credit  banks,  growth  of 101,  198  et  seq. 

English  banks 202  et  seq. 

German  cooperative  credit  societies,  annual  increase 101 

German  savings  banks,  character  and  composition  of 195, 199,  237 

German  savings  banks,  growth  of 100 


1027 


National    Monetary     Commission 


Deposits  at —  Page. 

The  Darmstadter  Bank,  1870-1908 208 

The  Deutsche  Bank,  1871-1908 205 

The  Discontogesellschaft,  1871-1908 207 

The  Dresdner  Bank,  1875-1908 207 

Deposits: 

Central  deposit  bank  proposed  by  Caesar  Straus 550 

Character  of  funds  intrusted  to  the  credit  banks 197,  198 

Comparative  growth  of,  at  German  and  foreign  banks 200 

(Depositen.)     Difficulty  of  definition 196 

Fostering  of,  by  the  Deutsche  Bank 192 

Granting  of  a  prior  lien  to  depositors  dangerous  to  the  credit  of 

the  banks 577 

Heiligenstadt  's  proposal  of  the  maintenance  of  a  minumum  cash 

reserve  at  the  Reichsbank  by  the  deposit  banks 553 

In  the  United  States 203 

Lack  of  uniform  classification  by  the  great  banks 197 

Losses  of,  through  failure  of  banks 570 

Management  by  the  credit  banks  (Lansburgh 's  criticism) 233 

Objections  to  Heiligenstadt 's  proposal  of  an  "iron  reserve"  at 

the  Reichsbank 580  et  seq. 

Objections  to  legal  regulation  of    the    modes   of    investing 

deposits 579 

Objections  to  the  requirement  of  a  fixed  ratio  between  de- 
posits and  the  share  capital 578  et  seq. 

Proposals  regarding  greater  publicity 551  et  seq. 

Proposed  limitation  of  deposits 551 

Proposed  monthly  or  quarterly  bank  statements 552 

Proposed  separation  between  the  [deposit  and  the  notation 

and  issue  business 550 

Reform  proposals  in  the  field  of 549  et  seq. 

Reichsdepositenbank  proposed  by  Warschauer 550 

Solicitation  of 597  et  seq. 

Deutsch-Amerikanische  Treuhand-Gesellschaft 435,  474 

Deutsch-Asiatische  Bank '. 436, 

441,  445,  448,  450,  453,  455,  487,  494,  5°6>  5">  525 
Deutsch-Luxemburgische    Bergwerks-    und   Huttenaktiengesell- 

schaft 729 

Deutsch-Ost-Afrikanische  Bank 438, 443,  457, 474,  487 

Deutsch-Sudamerikanische  Bank 446,  453,  494,  512 

Deutsch-Westafrikanische  Bank 445,  457, 494 

Deutsche  Bank: 

Absorption  of  provincial  banking  concerns 660 

Amount  of  acceptances,  1895  to  1908 286 

Amount  of  deposits,  1871-^1908 205 

Amount  of  loans  on  collateral,  including  reports 321 


1028 


The     German    Great     Banks 


Deutsche  Bank — Continued.  Page. 

Branches,  business  of 691 

Branches  in  Bremen  and  Hamburg 423 

Branches  in  Yokohama  and  Shanghai 422 

Character  of  management 472 

Commandite  in  New  York 423,  435 

Commandites  in  Paris,  Vienna,  and  Madrid 439 

Deposits  at  the  central  office  and  at  the  branches 692 

Classification  of  securities  held 404 

Communities  of  interest. 473,  616 

Early  criticism  of  its  business  policy 423  et  seq. 

Efforts  to  introduce  foreign  bills  of  exchange  in  terms  of  Ger- 
man currency '. 422 

Experience  with  its  commandites  in  New  York  and  Paris ....  682 

Export  policy 473 

Fostering  of  the  deposit  business . 473 

Increase  of  capital  stock 658 

Industrial  connections 373 

Industrial  policy , 473 

Liquidation  of  banks 637 

Losses 478 

Losses  from  the  founding  business  and  participations 344 

Number  and  amount  of  syndicate  participations 400 

Number  of  current  accounts  in  1908. 268 

Number  of  deposit  offices 206 

Opening  of  deposit  offices 192 

Ratio  of  own  resources  to  liabilities 560 

Participation  in  African  mining  business 440 

Payment  of  the  indemnity  to  Spain  for  the  cession  of  the 

Philippines  to  the  United  States 323 

Permanent  participations  in  1899  and  1903 638 

Policy  of  promoting  oversea  trade • 42 1 

Recent  practice  of  discounting  outstanding  accounts  of  its 

customers 263 

Relations  to  the  petroleum  industry 417 

Reorganization  of  the  Northern  Pacific  Railroad  Co 435,  478 

Representation  in  London 422,  423 

Rules  regarding  the  deposit  business 206 

Statistical  view  of  development,  1870  to  1908 480-481 

Group.     Capital  power 643-644 

Deutsche  Afrika-Bank 443,  487 

Deutsche  Handels-  und  Plantagen-Gesellschaft  der  Siidseeinseln.  .  440,  486 

Deutsche  Orientbank 446,  453, 454,  494,  511,  512 

Deutsche  Palastina-Bank 454 

Deutsche  Treuhand-Gesellschaft 436 

Deutsche  Ueberseebank,  founded  by  the  Deutsche  Bank, 433 


1029 


National    Monetary     Commission 

Page. 

Deutsche  Ueberseeische  Bank,  dividends  and  branches 433  et  seq. 

Disconto-Gesellschaf  t : 

Absorption  of  provincial  banking  concerns 660 

Amount  of  acceptances,  1895  to  1908 286 

Amount  of  deposits,  1871-1908 207 

Amount  of  foreign  bills 262 

Amount  of  loans  on  collateral,  including  reports 321 

Branches  in  London  and  Bremen 444 

Capital  during  the  first  period 67 

Commandites  in  Buenos  Aires  and  Antwerp 441 

Community  of  interest  with  the  Norddeutsche  Bank 664 

Current-account  business 488 

Deposits  prior  to  1870 70 

Deposit  business 489 

Dividends 67,68,490 

Early  flotations 340 

Financing  of  the  Great  Venezuelan  Railroad 444 

General  business  policy 482  et  seq. 

Growth  of  deposit  offices 208 

Increase  of  capital  stock 657 

Industrial  connections 374 

Industrial  policy 482 

Losses  from  the  founding  business  and  participations 343 

Member  of  the  Rothschild  syndicate 445, 482 

Mortgage  credit 486 

Origin 46 

Participations  in  railway  transactions  before  the  seventies 65, 66 

Relations  to  the  petroleum  industry 418 

Ratio  of  own  resources  to  liabilities 560 

Underwriting  of  State  and  municipal  loans  prior  to  1870 62,  63 

Disconto-Gesellschaft  group :  Capital  power 644 

Discount  policy  of  the  Bank  of  England  thwarted  by  the  compe- 
tition of  the  joint-stock  banks 575 

Discount  rates : 

Causes  of  the  relatively  large  margin  between  the  German 

official  and  private  rates 301  et  seq. 

Connection  between  the  official  rates  and  the  rates  of  exchange .  305, 306 
Differences   between   official    and    private    rates    at  leading 

money  markets  1876-1907 300 

High  rates  and  gold  imports 304, 305 

Movement  during  the  years  1852-1857 58-59 

Official  and  private  at  Berlin,  Paris,  and  London  1876-1908.   155, 156,  157 
Rise  of,  a  symptom  of  an  approaching  crisis 17 

Discounting  of  outstanding  accounts  by  the  Deutsche  Bank 263 

Distribution  of  risk,  principle  of 12  et  seq. 

Domestic  public  securities :  Investments  of  the  German  public  in . .  228,  239 

1030 


The     German    Great    B 


a  n 


•Page. 

Dortmunder  Union 734,  736,  737 

Dresdner  Bank: 

Absorptions  of  provincial  banking  concerns  and  their  trans- 
formation into  branches 660 

Agreement  with  the  A.  Schaaffhausenscher  Bankverein 674, 1003 

Alliance  with  J.  P.  Morgan  &  Co 446 

Amount  of  acceptances  held  at  the  end  of  1895  to  1908 286 

Amount  of  deposits  1875-1908 207 

Amount  of  foreign  bills  held  by  the 261,  262 

Amount  of  loans  on  collateral,  including  reports 321 

Branches  in  Hamburg,  Bremen,  and  London 445, 493 

Capital 497 

Classification  of  securities  held 404 

Community  of  interest  with  the  A.  Schaaffhausen'scher  Bank- 
verein    494,  674, 1003 

Deposit  business 492 

Dividends 496-497 

Growth  through  establishment  of  branches  and  absorption  of 

banking  firms 492-493 

Increase  of  capital  stock 658 

Industrial  connections 374 

Issues  of  industrial  securities 495 

Liquidation  of  banks 636 

Losses 496 

Losses  from  the  founding  business  and  participations 344 

Number  and  amount  of  syndicate  participations 401 

Number  of  current  accounts 268,  269 

Ratio  of  own  resources  to  liabilities 560 

Real  estate  business 496 

Relations  to  the  electrotechnical  industry 495,  496 

Relations  to  the  petroleum  industry 419 

Dresdner  Bank  Group :  Capital  power 644-645 

Dresdner  Kreditanstalt:  Cause  of  failure 231 

Duisburg-Ruhrorter  Bank 677 

Dutch-South  African  R.  R.  Co 451 

Electro-technical  industry: 

Dependence  on  the  banks 713  et  seq. 

General  scheme  of  development 752 

Groups  in  1900 715 

Growth  of 123, 124, 125,  713  et  seq. 

Value  of  output ' 714 

Elektro-Treuhand-Gesellschaft 718 

English  banks:  Drift  of  provincial  banks  toward  London 655 

Essener  Bankverein 677 


1031 


National    Monetary     Commission 


Page. 

Essener  Kreditanstalt 641,  646 

Exchanges  in  Germany  before  1870 38 

Export  capitalism,  limitations  of 115 

Export  trade :  Bank  credit 426 

Exports  of  German  capital  necessary  to  improve  the  national 

balance  of  payments 531 

Exports  of  industrial  products:  Necessary  to  compensate  in  part 

for  the  imports  of  food  stuffs  and  raw  materials 1 10, 1 1 1,  528 

Farbenfabriken  vormals  Friedrich  Bayer  &  Co 721 

Farbwerke  vormals  Meister,  Lucius  &  Bruning 721 

(See  also  Hochst  Dye  Works.) 

Finance  bills 278  et  seq. 

Fiscal  agencies  for  industrial  companies 370 

Flotation  business: 

Early  abuses 341 

Policy  of  the  great  banks 343 

Flotation  of  stock  companies  before  1870  and  after 338 

Foreign  banking  business:  Chief  operations  involved 540 

Foreign  banks  of  England  and  the  acceptance  business 299 

Foreign  bills: 

Amount  held  by  the  Disconto-Gesellschaft 262 

Amount  held  by  the  Dresdner  Bank 261,  262 

Foreign  investments  of  British  capital 533 

Foreign  investments  of  French  capital 533~534 

Foreign  investments  of  German  capital : 

Estimated  amount 545 

Limitations 534~535 

Necessity  for  constant  increase  of 537 

Foreign  participations  of  the  great  banks 532 

Foreign  securities  owned  in  Germany,  estimated  amount 546 

Foreign  trade: 

Growth  of 102,  in 

Larger  growth  of  imports  than  of  exports 112 

Freight  traffic  in  Germany  in  1840  and  1900 31 

"  Fremde  Gelder "  (outsiders'  funds) :  Composition  of 190 

Fusions  among  English  banks 662-663 

Fusions  among  Scotch  banks 662 

Fusions  forced,  cases  of 661,  662 

Fusions  of  banking  concerns:  Reasons  for 661 

"  Futures, "  dealing  in,  legal  restrictions  of 622 

Gelsenkirchener  Bergwerksgesellschaft 483,  617,  729,  734,  745 

Combination  with  the  Rote  Erde  and  the  Schalker  Gruben-  und 

Hiittenverein 712 

Increase  of  capital 747-749 


1032 


The     German    Great     Banks 


Page. 

General  Electric  Co.  (Allgemeine  Elektrizitatsgesellschaft) 522 

General  Mining  &  Finance  Corporation  (Ltd.) 443,  444,  447 

German  banking:  View  of,  in  the  Bankers'  Magazine 57^-577 

German  Luxemburg  Mine  &  Smelting  Co. :  Suit  against  the  coal  syn- 
dicate           735 

Great  banks : 

Coefficient  of  liquidity 565 

Development Appendix  VII,  p.  982 

Expansion  toward  the  Provinces 655 

Ratio  of  liabilities  to  own  resources 560 

Representation  of  industrial  interests  on  the  boards  of  the 

banks 617 

Representation  on  the  supervisory  boards  of  stock  companies.  366 

(Appendix  IV,  p.  897) 

Hamburg- American  Steamship  Co 135,  136 

Haniel  family,  mine  ownership 743,  744 

Hannoversche  Bank 643,  646 

Harpener  Bergbaugesellschaft 510,  523,  617 

"  Heavy  Terms  "  (Schwere  Termine) 161 

Helios  group :  Affiliated  banks 715,717 

Hendschel  works 707,  710-711,  737 

Hibernia  Mining  Co. :  Acquisition  of  stock  for  the  Prussian  Gov- 
ernment by  Great  Banks 323, 324,  523,  729-730 

Hoechst  Dye  Works:  Community  of  interest  with   Leopold   Cas- 

sella  &  Co 708,  721  et  seq. 

Hoerder  Bergwerks-und  Hiittenverein 509 

Fuses  with  the  Phoenix 707-708 

Hoesch  Iron  &  Steel  Works 510,  734 

Combination  with  the  Westf alia  Mines 706 

Import  duties  on  iron  and  steel,  and  the  independent  producers .    176  et  seq. 

Import  trade,  bank  credit 428 

Incomes  in  Prussia 93 

Income,  national,  estimates  of 92 

Incomes,  private,  distribution  of,  in  Prussia 96  et  seq. 

Incomes,  private,  distribution  of,  in  Saxony 99 

Industrial  concentration  fostered  by  cartels 709 

Forms 704  et  seq. 

Influence  on  concentration  in  banking 703  et  seq. 

Industrial  credit: 

Distinct  from  commercial  credit 241  et  seq. 

In  Austria 254 

Leading  to  involuntary  reorganization  of  the  borrowing  concern 

by  the  lending  bank 246 

Organic  development  by  the  credit  banks 249 

Purposes  for  which  sought 243 

Secured  by  mortgage 244  et  seq. 


National    Monetary     Commission 


Page. 

Industrial  export  policy  supported  by  the  great  banks 529 

Industrial  flotations  by  the  joint-stock  banks  before  1870 63 

Industrial  production:  Growth  of,  since  1882 112 

Industrial  relations  of  the  great  banks 373 

Industrialization  and  growth  of  population in 

Industrialization  of  Germany,  causes  of  rapid 239,  240 

Industrials:  Number  of  issues  of  industrial  securities  by  the  great 

banks .*.          515 

Industry  and  the  credit  banks 230 

Interest:  Calculation  of,  on  current  accounts 266 

Interest  and  commissions :  Per  cent  share  of  total  profits  of  the  great 

banks 272 

International  Mercantile  Marine  Co 136, 137 

Internationale  Bohr-Gesellschaft  (Erkelenz) 512,  736 

Investments  in  foreign  securities:  Financial  and  political  advan- 
tages    541  et  seq. 

Iron  and  steel:  Import  duties  on,  and  the  independent  pro- 
ducers    176  et  seq. 

"Iron  reserve  "  at  the  Reichsbank,  proposed  by  Heiligenstalt . .  580  et  seq. 

Issues  of  industrial  shares,  1892-1908 37*~372 

Issues  of  industrial  bonds,  1900-1908 372 

Joint-stock  banks  in  England : 

Business  policy  criticized 555 

Inadequate  cash  reserve 558 

Promote  speculation 556 

Small  capital 557 

Joint-stock  banks  in  Germany,  origin  due  to  the  general  industrial 

development 5 

Joint-stock  companies  floated  before  1870  and  after 338 

Kamerun  Railroad  Co 444,  447,  448,  451,  453,  458,  494,  507,  526 

Konigs-und  Laurahiitte 617 

Konsolidation  Bergwerks-Aktiengesellschaft  at  Schalke 617 

Kontinentale  Eisenbahnbau-und  Betriebsgesellschaft 495 

Kreditna  Banka.     See  Banque  de  Credit  at  Sophia. 

Kummef  group :  Affiliated  banks 7 15,  7 18 

La  Plata  Bank 423,  440 

Lahmeyer  group 715 

Affiliated  banks 717 

Landschaften 224 

Leerwechsel  (nominal  bills).     See  Finance  bills. 

Leipziger  Bank:  Causes  of  failure 231 

Liabilities,  composition  of 563 

Liquid  assets  of  banks,  composition  of 190,  563 

Liquidation  of  banks  as  the  result  of  the  crisis  of  1873 636 


1034 


The     German    Great    Banks 


Page. 

Liquidity,  coefficient  of 561  et  seq. 

Liquidity,  coefficient  of,  for  all  German  credit  banks 565 

Liquidity  of  assets,  principle  of 12  et  seq. 

Liquidity  of  resources  of  the  credit  banks,  causes  of  the  decrease  of .  565 

Listing  of  securities,  minimum  issues,  listed  at  leading  bourses. . .  248 

Lloyds  Bank:  Branches 663,  685-686 

Loewe  group 416,  485 

Loans: 

Carried  by  the  larger  credit  banks,  and  ratio  to  their  capital. .  274 

Of  German  States  and  municipalities,  amount  of,  1894-1908. .  381-383 
Per  cent  share  of  the  assets  of  the  larger  credit  banks  invested 

in  loans 274 

Per  cent  share  of  the  assets  of    the   (Berlin)   great  banks 

invested  in  loans 275 

Loans  on  collateral : 

Amount  and  distribution  of,  granted  by  the  Reichsbank  in 

i9°8 - 3*9 

Customary  terms 318 

For  fixed  term,  granted  by  the  Seehandlung 311 

Kinds  of  security 307,  308 

Not  part  of  the  note  reserves  of  the  banks  of  issue 309 

Loans  on  collateral  including  reports: 
Amount  of — 

Outstanding  at  all  the  larger  credit  banks 322 

Outstanding  at  the  Darmstadter  Bank 322 

Outstanding  at  the  Deutsche  Bank 321 

Outstanding  at  the  Disconto-Gesellschaft 321 

Outstanding  at  the  Dresdner  Bank 321 

Outstanding  at  the  six  great  Berlin  banks 322 

Ratio  to  total  assets  of  the  great  banks 322 

Lombard  business.     See  Loans  on  collateral. 

London   &  County  Banking  Co.  (Ltd.):  Fuses  with  the  London 

&  Westminster  Bank  (Ltd.) 663 

London  &  Westminster  Bank  (Ltd.):  Fuses  with  the   London  & 

County  Banking  Co.  (Ltd.) 663 

London  City  &  Midland  Bank 662-663 

Branches 685 

London  County  &  Westminster  Bank  (Ltd.) 663 

Lorraine-Luxemburg  district,  increasing  importance 740  et  seq. 

Luxemburg- Lorraine  Pig  Iron  Syndicate 729,  730 

Magdeburger  Bankverein 673 

Concentration 629 

Magdeburger  Privatbank,  concentration 630 

Fusion  with  the  Dresdner  Bankverein 661 

Mecklenburgische  Hypotheken-und  Wechselbank,  check  business .  2 18 


National    Monetary     Commission 

Page. 
Merchant  bankers  in  England,  and  the  acceptance  business. . .  .  299 

Merchant  marine,  growth  of 133,  134 

Principal  shipping  companies 135  et  seq. 

Ship  subsidies 134,  135 

Mexikanische  Bank  fur  Handel  und  Industrie 434,  438,  439,  474 

Mitteldeutsche  Kreditbank,  business  operations  prior  to  1870.  .   77  et  seq. 

Capital 641 

Dividends,  1857-1869 80 

Early  flotations  and  transformations 340 

Increase  of  capital  stock 657 

Origin 46-47 

Mitteldeutsche  Privatbank 63 1-632 

Mittelrheinische  Bank 677 

"Mixed"  versus  "pure"  works  in  the  steel  industry 175  et  seq. 

"Mixed"  versus  "pure"  works,  struggle  between  the,  and  attitude 

of  the  banks 728 

Moselle  Canal :  Opposition  by  the  iron  interests  in  the  Saar  district .  732 

Nationalbank  fur  Deutschland,  capital 641 

Increase  of  capital  stock 658 

Participations 453 

Ratio  of  own  resources  to  liabilities 560 

Nationalization  of  industry  as  a  whole  impracticable.... 776-777 

Navigation,  inland 141 

Neu  Guinea  Kompagnie 440, 487 

Norddeutsche  Bank 444,  644 

North  German  Lloyd 136 

Oberschlesische  Eisenbahnsbedarfs-Gesellschaft 739 

Oberschlesische    Eisenindustrie    Aktiengesellschaft    Caro-Hegen- 

scheidt 524 

Occupations,  distribution  of  population  by 103  et  seq. 

Oldenburgische  Landesbank,  check  business 219 

Oldenburgische  Spar-  und  Leihbank,  check  business 219 

Organic  matter,  displacement  by  inorganic  matter  (Sombart). ...  in 

Osnabriicker  Bank 646 

Ostafrikanische  Gesellschaft 438, 443 

Ostbank  fur  Handel  und  Gewerbe 646 

Otavi  Mining  &  Railroad  Co 442,  443,  487 

Over-sea  business,  profits  of  the  banks  from 538-539 

Over-sea  shipping,  earnings  of  the  merchant  marine 540 

Participations:  Impossibility  of   foretelling   assessments    due   on 

account  of 592 

Patent  laws,  British  and  German  industry 127,  128 

Petroleum  industry:  Financial  relations  to  the  great  banks.  . . .  417  et  seq. 

Phoenix 510,  617,  734 

Acquisition  of  coal  mines 711 

Combination  with  the  Nordstern  mines 706 

1036 


The     GermanGreat     Banks 


Page. 

Phoenix — Continued. 

Fusion  with  the  Hoerder  Mining  &  Smelting  Co 707-708 

Induced  to  join  the  Steel  Works'  Union  by  the  banks 727 

Pig  iron : 

Consumption  and  exports,  growth  of 122 

Consumption  in  the  Zollverein  during  1847  an<^  I&99 32 

Growth  of  output  in  principal  countries 120,  121 

Production  of  1850  and  1875 32 

Population,  distribution  by  city  and  country 89-90 

Growth,  in  Germany  between  1816  and  1895 43,  44,  89 

Growth,  in  large  cities 90,  91 

Growth,  in  the  industrial  and  rural  districts,  respectively.  ...  44 

Of  France  about  1848 28 

Of  Germany  about  1848 28 

Of  Prussia,  distribution  by  principal  occupations  in  1843  •  •  •  •  33 

Part  engaged  in  gainful  occupations 90 

Postal  facilities,  development  of 36,  131 

Postal  transfer  and  check  system,  benefits  to  the  small  traders 226 

Joined  by  the  Reichsbank : . .  146 

Prime  discounts 277,  289 

Private  bankers,  smaller: 

Existence  threatened  by  concentration  in  banking 759 

Legitimate  economic  functions 760 

Private  banking,  decline  of 623  et  seq. 

Private  banking  business:  Transformation  into  joint-stock  concerns.  762-763 

Private  discount  rate 289,  290 

Property  assessed  for  taxation,  value  of 93 

Prosperity,  growth  of,  evidence  of 775~7?6 

Provincial  bankers,  adverse  legislation 619 

Provincial  banks 668  et  seq. 

Drift  toward  Berlin 653  et  seq. 

Prussian  syndicate 378, 409 

Prussian  war  loans  of  1870-71 379,  380 

Public  ownership  and  operation  of  industry  as  a  whole  undesirable .  776-777 

Railway,  first  German 31 

Railways: 

Capital  i sted  in  up  to  1870 35 

Construction  of,  and  demand  for  iron 32 

Development  of 130, 131 

Extension  of,  1835  to  1875 34,  35 

Secondary.     Bank  groups 417 

Raw  materials:  Necessity  of  increasing  imports no 

Regatul  Romana ». .  512 

Reichsbank  and  the  postal  transfer  and  check  system 146,  226 

Average  amount  of  bills  held 158 


National    Monetary     Commission 

Reichsbank  and  the  postal  transfer  and  check  system — Continued.  page. 

Business  operations,  permitted  by  the  bank  act 144 

Capital  and  surplus 142 

Clearance  system 148 

Criticism  of  its  discount  policy 160, 161, 163 

Giro-transactions 145, 146, 147 

Gold  reserve 152 

Holdings  of  foreign  bills 161, 162 

Increase  of  the  tax-free  "contingent"  of  unsecured  notes 166 

Issue  of  unsecured  notes 153, 154 

Loans  on  collateral 159 

Management 142 

Metallic  reserve,  1876-1908 155 

Note  issues 143, 144 

Notes  declared  legal  tender 165 

Reports  of  conditions 145 

Strengthening  of  the  resources  by  increasing  the  surplus 588 

Turnover 149 

Rembours-credit  in  export  trade 427 

*  In  import  trade 430 

"  Reports."    See  Loans  on  collateral. 

Representation  of  industrial  interests  on  the  boards  of  the  great 

banks 617 

Rheinisch-Westfalische  Disconto-Gesellschaft 654,  673 

Capital 641 

Concentration 633-635 

Rheinische  Kreditbank :  Capital 641 

Rheinische  Stahlwerke:  Combination  with  the  Zentrum  mines. . .  706 

Rhenisch-Westphalian  coal  syndicate 483 

Reorganizations  of  distressed  concerns  by  banks 365 

Report  business:  Taxation  of 316 

Report  money 313 

Report  transactions :  Increase  of — index  of  increased  speculation ...  315 

Reserve  fund,  legal  provisions 347 

Rohbilanzen.     (See  Summary  bank  statements.) 

Rombacher  Hiittenwerke 523 

Roumanian  petroleum  business 512 

Ruhr  district:  Purchase  of  coal  mines  by  ironworks 734 

Saar  district :  Industrial  conditions 740 

Sachsische  Discont-Bank,  fused  with  the  Dresdner  Bankverein. . .  661 

Savings,  annual,  estimates 92 

Savings  banks,  deposits  in  German,  growth  of 100 

Schalker  Gruben-  und  Hutten-Verein 483,  484 

Schaaffhausen 'scher  Bankverein: 

Amount  of  acceptances  held  at  the  end  of  1895  to  1908 286 

Branch  in  Berlin 509,  510 

1038 


The     German    Great     Banks 


Schaaffhausen 'scher  Bankverein — Continued.  Page. 

Community  of  interest  with  the  Dresdner  Bank 494,  511,  674,  1003 

Communities  of  interest,  other 511 

Concentration  through  the  opening  of  branches  and  the  estab- 
lishment of  subsidiary  banks 511 

Connections  with  the  mining  and  smelting  industries 515 

Deposits  during  early  period 73 

Dividends,  1848-1870 74 

Early  development 71  et  seq. 

Early  flotations 339 

General  business  policy 508 

Increase  of  capital 510,  511,657 

Industrial  business  and  reorganizations 514 

Industrial  connections 374 

Issues  of  industrial  securities 515 

Origin 46 

Participations 452  et  seq. 

Participations  in  the  common  foreign  business  of  the  great 

banks 511 

Railway  business 513 

Ratio  of  own  resources  to  liabilities 560 

Schaaffhausen 'scher  Bankverein  group,  capital  power 645 

Schlesische  Handelsbank 671 

Schlesischer  Bankverein v 473,  616 

Schuckert  Electric  Co 512 

Schuckert  group:  Affiliated  banks 715,  717 

Schweizerischer  Bankverein 451,  526 

"  Schwere  Termine  "  (heavy  terms) 161 

Seehandlung:  Loans  on  collateral  for  fixed  terms 311 

Securities  held  by  German  investors  in  1907:  Estimate 95  et  seq. 

Securities: 

International  movement  of 534~S3S 

Value  of,  listed  at  the  Berlin  Exchange 93  et  seq. 

Security  account:  Classification  adopted  by  the  great  banks.  . .   403  et  seq. 
Security  business: 

Amount  of  securities  owned  by  the  great  banks,  classed  by 

principal  groups 405 

Voluntary  or  involuntary 402 

Security  issues: 

Amount,  1889-1908 358 

Amount  of  foreign  securities  issued  in  Germany,  1894-1908.  392  et  seq. 

"  Concert  subscribers" 355 

Distribution  by  principal  classes 359  et  seq. 

By  the  banks,  factor  in  causing  industrial  consolidations  and 

combinations 368  et  seq. 

By  the  banks,  preliminary  work  and  negotiations 348  et  seq. 


1039 


National    Monetary     Co  mm  is  sio 


n 


Page. 
Security  issues — Continued. 

By  the  banks,  special  legal  features  of  contract 351 

By  the  great  banks,  listed  at  all  German  stock  exchanges. 

Appendix  VI-959 
By  the  great  banks  listed  at  the  Berlin  Stock  Exchange. 

Appendix  ¥-921 

" Exotic"  values 390 

Foreign  loans,  issued  in  England,  1822-1825 391 

Principles  to  govern  financing  of  foreign  issues 384 

State  and  municipal  loans,  financed  by  the  great  banks.  . .  378  et  seq. 

Underwriters'  syndicates 356 

Upper  and  lower  limits  of  issue  price 353 

Waltershausen's  reform  proposals  regarding  foreign  business, 

and  criticism  of  these  proposals 387  et  seq. 

Shantung  Mining  and  Railway  companies:  Participation  of  the 

great  banks 437*442,  445>  44$,  45°>  453>  454,  459>  487,  494,  5°7>  511,  526 

Shipbuilding,  growth  of 140 

Ship  subsidies.     See  Merchant  marine. 

Sieg  district:  Influence  of  the  banks  on  the  iron  industry 732 

Siemens  &  Halske  group,  affiliated  banks 416,  715,  716 

Siemens-Schuckert  combination 718 

Silent  partnerships.     See  Commandites. 

Societe  generale :  Agencies  and  branches 686 

Sovereign  Bank  of  Canada 446 

Spaeter  &  Co 747 

Specialization  jn  German  banking 649-650 

Speculation,  excessive,  preceding  a  crisis 17 

Stahlwerksverband.     See  Steel  Works'  Union. 

Stamp-tax  legislation  fostering  concentration 618  et  seq. 

Steam  engines,  number  and  horsepower  of,  employed  in  industry .  103 

Steam  engines  and  motors,  about  1850  and  in  1895 30 

Steel  Works'  Union  and  the  International  Girder  Cartel  and  the 

International  Rail  Cartel 182, 183 

Business  policy 174  et  seq. 

Formation 640 

Memorials  presented  by  the  "  pure  "  works  against  the ....   175  et  seq. 

Organization 174 

Part  of  the  A.  Schaaffhausen  'scher  Bankverein  in  forming  the .  516 

Stinnes,  Hugo: 

Industrial  affiliations 742  et  seq. 

Relations  to  the  banks 745-746 

Stock  exchange:   Weakening  of,   as  result  of  concentration  of 

banking. 77J-772 

Stock-exchange  legislation  fostering  concentration  of  banking. .  618  et  seq. 


1040 


The     German    Great     Banks 


Page. 

Subsidiary  banking  establishments,  disadvantages 671 

Subsidiary  companies,  in  Germany,  of  German  banks 667-668 

Siiddeutsche  Eisenbahngesellschaft 505 

Summary  bank  statements: 

According  to  a  prescribed  scheme,  criticism  of 590,  594  et  seq. 

For  all  deposit  banks,  proposed  by  Count  Arnim-Muskau . .  .  589 

Voluntary,  beneficial  effect  of 593 

Of  the  Berlin  great  banks 597 

Supervisory  board :  Governmental  supervision  of  banking  opposed .  599-601 

Surplus  funds  in  banking  and  industry 470 

"Syndicate"  account  lumped  with  " securities " 399 

Syndicate  participations  of  the  great  banks 400,  401 

Syndicates: 

Early  instances 396 

Subsidiary  participations *  .  397 

Syndikatskontor  des  A.    Schaaffhausen'schen  Bankvereins 616,  726 

Telegraph  service,  growth  of 132 

Telegraphs  in  Germany,  beginnings  of 37 

Telephone  service,  growth  of 132, 133 

Terlinden  Co 244 

Textile  industries,  recent  development  of 128,  129,  130 

Thyssen,  August: 

Industrial  activity  and  affiliations 741  et  seq. 

Industrial  operations 711 

Relations  to  the  banks 745 

Trade  insurance  associations  (Berufsgenossenschaften),  growth  of 

membership 102,  103 

Transformation  of  existing  concerns  by  the  banks 345 

Treuhand-Bank  fur  die  elektrische  Industrie,  A.  G 719 

Trust  companies 672 

Ultimo  loans 311 

Ungarische  Escompte-  und  Wechselbank  in  Budapest 449,  503-504 

Unification  of  Germany  in  the  commercial  field 36 

In  the  economic  field 87  et  seq. 

Union  Elektrizitatsgesellschaft  group 715 

Affiliated  banks 416,  717 

United  States  Steel  Corporation,  effect  on  the  concentration  move- 
ment in  Germany 639-640 

Joins  the  International  Rail  Cartel 183 

Upper  Silesian  coal  convention 738 

Upper  Silesian  district:  Part  taken  by  the  banks  in  forming  indus- 
trial combinations 737  et  seq. 

Upper  Silesian  Steel  Works  Union,  formation 640 


90311° — ii 67  1041 


National     Monetary     Commission 

Page. 
Vereinigte  Westdeutsche  Kleinbahn-Aktiengesellschaft 525 

Wages  in  German  industry,  movement  of 773~774 

War,  business  policy  of  the  banks  immediately  preceding  and 

during 22  et  seq. 

War  clause  in  issue  contracts 351 

War,  financial  preparation  and  readiness  for 24 

Maintenance  of  the  German  currency  and  credit  systems  dur- 
ing   25 

Treasure 24 

Wars,  European,  effect  upon  the  economic  development  of  Ger- 
many   27 

Wealth,  national,  estimates 91  et  seq. 

Wechselstuben  (exchange  offices) 195 

Westdeutsche  Eisenbahngesellschaft 513,  524 

Westfalisch-Lippische  Vereinsbank  (Bielefeld) 511,  670 

Westfalische  Union 737 

Workmen,  number  of,  engaged  in  mining  and  smelting  about  1850 

and  1895 30 

Wiirttembergische  Bankanstalt,  Stuttgart 449 

Community  of  interest  with  the  Wurttembergische  Vereins- 
.bank 664 

Zentral-Amerika-Bank 438 

Zollverein : 

Establishment  of 29 

Foreign  trade,  1842  to  1846 29-30 


1042 


v  US 


.T     P{ 


RETURN 


LOAN  PERIOD  1 

2 

3 

4 

5 

6 

ALL  BOOKS  MAY  BE  RECALLED  AFTER  7  DAYS 

DUE  AS  STAMPED  BELOW 


r>ec  ^ 

FEB  0  8  2001 

^/T^/^ 

OCT  i  i  2005 

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1 

UTODISCCIRC  WAV  23 

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CIRCULATION  DEPT, 

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1  •ay.ECEIVED 

MAR  3  0  1995 

JUL  i:  1993 

JUL  1K  1993 

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UNIVERSITY  OF  CALIFORNIA,  BERKELEY 
FORM  NO.  DDO,  5m,  3/78  BERKELEY,  CA  94720 


®s 


U.C.  BERKELEY  LIBRARIES 


